China's yuan weakened on Thursday after the central bank set the daily midpoint against the US dollar at its weakest level in more than a month. The People's Bank of China set the midpoint rate at 6.1302 per dollar prior to market open, weaker than the previous fix 6.1269 and at its weakest level since December 8. The spot market opened at 6.2170 per dollar and was changing hands at 6.2190 in early morning trade, 1.4 percent weaker than the midpoint.
The spot rate is currently allowed to trade within a range of 2 percent above or below the official fixing on any given day. The renewed weakness in the yuan comes at a time when latest data has shown that manufacturing activity has slowed and the property market has softened, indicating the central bank may resort to more interest rate cuts, reducing the attractiveness of the currency. Offshore one-year non-deliverage forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.323, 3.05 percent weaker than the midpoint.
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