SHANGHAI: China's yuan was headed for its third straight week of losses against the dollar on Friday, despite trading a touch stronger in the morning.
The yuan has fallen 0.4 percent so far this week and more than 6 percent against the dollar so far this year.
Its slide has accelerated along with other emerging market currencies in recent weeks as the dollar surged on expectations of higher US interest rates.
Some investors and companies were selling dollars on Friday to lock in profits, fearing state-owned banks could step in to support the yuan by providing dollar liquidity near the 6.92 level, as happened on Thursday, traders said.
"It is hard to figure out how the yuan will move in the near term as everything is following the dollar, but such a bull run for the dollar is so rare," said a Shanghai-based trader at a foreign bank, noting that global markets were waiting for the dollar to take a breather.
The People's Bank of China set the midpoint rate at 6.9168 per dollar prior to the market open, weaker than the previous fix of 6.9085 and a fresh low since June 2008.
The spot market opened at 6.9205 per dollar and was changing hands at 6.9143 at midday, 37 pips firmer than the previous late session close and 0.04 percent stronger than the midpoint.
China's currency has notched new multi-year lows against the dollar, while quietly strengthening versus its Asian peers. The TR/HKEx Global CNY Index hit its highest since late July on Friday.
The yuan's value based on the market's trade-weighed basket has steadily hovered at above 94 level since August.
Traders said the steadiness of the yuan index was due to slumps in the euro and yen.
Some said that as long as the yuan index remains relatively stable the authorities would not have a problem with the currency's depreciation against the dollar as long as it remains gradual.
Intervention to support the yuan's exchange rate against the dollar "would end up lifting the yuan index a lot", said a Shanghai-based trader at a Chinese bank.
"And that would not make the yuan look good."
Separately, a Reuters poll suggested bearish bets on the yuan in the last two weeks likely grew to the largest since early January, according to the survey of 16 fund managers, analysts and currency traders conducted between Tuesday and Thursday.
The global dollar index fell to 101.66 from the previous close of 101.7.
The offshore yuan was trading 0.34 percent softer the onshore spot at 6.9376 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 7.1150, 2.79 percent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate.
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