China's yuan firmed on Thursday as expectations grew that the dollar's weakness has more room to run in the wake of some tepid US data, though brewing tensions in the Middle East capped gains. Risk appetite took a knock from news Saudi Arabia and some of its Gulf Arab allies had launched air strikes in Yemen against Houthi fighters who have tightened their grip on the southern city of Aden.
The People's Bank of China set the midpoint rate at 6.1375 per dollar prior to market open, firmer than Wednesday's fix of 6.141.
The spot market opened at 6.2085 per dollar and was changing hands at 6.2108 in late morning trades, broadly unchanged from Wednesday and 1.19 percent weaker from the midpoint.
The offshore yuan was trading a shade weaker to the onshore spot rate at 6.2137 per dollar.
Despite renewed expectations of dollar weakness, traders were reluctant to push the yuan higher on worries the central bank may step in to prevent any sharp appreciation of its currency.
Last week, the yuan posted its best weekly performance against the dollar since December 2007, gaining 0.9 percent.
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 6.364, -3.56 percent away from the midpoint.
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