China's yuan weakened versus the dollar on Thursday as corporate dollar demand ahead of the coming long weekend offset a stronger central bank midpoint, traders said. The market will be closed on Friday for a public holiday. Companies typically need more dollars as reserves for possible settlement and other businesses ahead of a long break.
The People's Bank of China set the midpoint rate at 6.1137 per dollar prior to market open, firmer than the previous fix 6.1169 and equalling the multi-month high it fixed on December 17, 2014. The spot market opened at 6.1958 per dollar and was changing hands at 6.2047 at midday, 0.08 percent weaker than the previous close.
"While temporary dollar demand has depressed the yuan slightly, official support for the yuan means the currency will have limited room to fall sharply in the near term," said a trader at a European bank in Shanghai. Officials including Premier Li Keqiang and PBOC Governor Zhou Xiaochuan have pledged to keep the yuan stable despite pressure to depreciate coming from a sharp slowdown in the Chinese economy and broad dollar strength in global markets. Traders expected the yuan to move narrowly between 6.18 and 6.22 to the dollar next week.
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