China's yuan eased against the dollar on Friday as the central bank was believed to stay on the sidelines amid a flurry of messages coming out of central bankers and finance ministers from the G20 meeting, traders said. The People's Bank of China set the midpoint rate at 6.5338 per dollar prior to market open, 0.03 softer than the previous fix 6.5318.
The spot market opened at 6.5343 per dollar and was changing hands at 6.5364 at midday, easing 0.03 percent from the previous close. Traders said the yuan was under some depreciation pressure partly because of China's slowing growth, but that the central bank would control the pace of its weakening. The offshore yuan was trading at 6.5386 per dollar by midday and almost converged with the onshore spot, within 25 pips. The spread between the two has narrowed this week.
The onshore yuan softened 0.5 percent against the euro by midday at 7.2299. It firmed 0.5 percent against the Japanese yen, hovering at 5.7936 to 100 yen. State-owned banks traded actively on behalf of the central bank to offset heavy dollar purchases on Thursday afternoon to defend the yuan's value, traders said. "My guess is the yuan could be allowed to soften some 20 pips everyday," said a trader at a Chinese commercial bank in Shanghai. "This is what the market understands of the central bank's definition of stability."
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