China's yuan weakened against the dollar on Friday, taking its cue from a slightly strengthened US currency on global markets, but trading was directionless amid a lack of fresh domestic factors.
The yuan closed at 7.9763 versus Thursday's close of 7.9725, after the central bank set the yuan's daily mid-point at a weaker 7.9715 on Friday morning from Thursday's mid-point of 7.9708.
"Caution prevailed as the yuan failed to show clear signs of a quicker appreciation, which the market had expected early this week," said a Shanghai dealer at a European bank. "Banks took their cue from overseas markets on the absence of domestic news."
Many market watchers expect the yuan to quicken its pace of gains for the rest of this year. They believe the central bank will use the currency as a weapon to help cool China's racing economy after Beijing announced a rate hike Friday last week.
That anticipation helped the yuan hit 7.9640 on Monday, its highest level since it was revalued by 2.1 percent and depegged from the dollar in July 2005. But the yuan had dipped slightly since Tuesday, casting uncertainties over its short-term trend.
Despite the weakening, many dealers believe the yuan is still likely to rise steadily in the medium term. Some said they believed the currency was set to challenge the key resistance of 7.9550 in the next one or two weeks.
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