China's yuan strengthened against the dollar on Thursday after the central bank fixed a stronger midpoint in line with the greenback's global slump after the US Federal Reserve revised its outlook for future interest rate hikes.
The Fed kept interest rates unchanged on Wednesday and cut its expectations for rate raises in 2016 to two from four.
The US currency nursed losses following the Fed's announcement, with the dollar index, which tracks the greenback against a basket of six major currencies, down 0.8 percent on Wednesday.
The People's Bank of China set the midpoint rate at 6.4961 per dollar prior to market open, the strongest in the week, and 0.32 percent firmer than the previous fix 6.5172.
In the spot market, the yuan opened at 6.4988 per dollar and was changing hands at 6.4996 at midday, strengthening 0.37 percent from the previous close. It has barely budged since its opening fluctuations to move towards the midpoint.
The onshore yuan weakened 0.7 percent against the euro by midday at 7.2920. It also eased 0.5 percent against the Japanese yen, hovering at 5.7726 to 100 yen.
Traders reported bouts of dollar-buying in morning trade as the market remained cautious, testing if the yuan could cross the 6.500 threshold while most state banks stayed on the sidelines, keeping an eye on the currency market.
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