SHANGHAI: China's yuan was flat against the dollar on Friday for the third consecutive trading session after the central bank set the daily guidance rate weaker.
For the week, the currency is likely to be 0.05 percent lower if it closes at the midday level.
The People's Bank of China (PBOC) set the midpoint rate at 6.1167 per dollar prior to market open, 0.03 percent weaker than the previous fix at 6.115.
The spot market opened at 6.2059 per dollar and was changing hands at 6.2066 at midday, unchanged from the previous close.
Traders said the trading volume has been light for the week as the market lacks clear direction on the yuan's future movement.
They expect the currency to continue trading in a narrow range in the future.
The offshore yuan was trading 0.08 percent weaker than the onshore spot at 6.2115 per dollar.
Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.2465, down 2.08 percent from the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate, and now that the trading band has been widened to 2 percent in either direction, corporates are much warier of using the NDF to hedge given the basis risk inherent in them.
As a result the market has lost liquidity in recent years and has frequently proven an unreliable measure of market sentiment.
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