China's yuan weakened against the dollar on Thursday on strong corporate dollar demand and after the central bank set the official guidance rate at a three-week low, traders said. The People's Bank of China (PBOC) set the midpoint rate at 6.1171 per dollar prior to market open, the lowest level since June 10, or 0.04 percent weaker than the previous fix at 6.1149. The midpoint remained largely stable though, in line with its recent trend, traders said. The spot market opened at 6.2030 per dollar and was changing hands at 6.2048 at midday, down 0.06 percent from the previous close.
Corporates typically need more dollars in July when overseas-listed Chinese firms pay investors dividends, which is one of factors driving demand for the US currency. Still, traders believe the downside for the yuan beyond 6.22 per dollar is low in the short term.
"Range-bound trading will still be the norm despite the appetite for dollars," said a trader at a Chinese city commercial bank in Shanghai.
Traders forecast the yuan will continue to track a tight 6.18-6.22 range as Chinese officials have pledged to keep the currency stable despite the downside pressure exerted by a rising US dollar index. The rate of the offshore yuan was matching the onshore spot at 6.2048 per dollar.
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