SHANGHAI: China's yuan firmed against the US dollar on Wednesday despite its weakest midpoint in seven weeks, with traders saying major state banks were providing the market with dollars to meet corporate demand.

The yuan also took weaker-than-expected April inflation data in stride.

The central bank set its official midpoint at 6.9066 per dollar prior to the market open on Wednesday, its weakest level since March 21.

Wednesday's fixing was 29 pips, or 0.04 percent, softer than the previous fix, which was at 6.9037.

The weakness in the yuan midpoint followed movement of the global dollar index overnight, which hit a three-week high.

The dollar index fell in Asian trade and so didn't pile additional pressure on the yuan.

In the spot market, the onshore yuan opened at 6.9050 per dollar and was changing hands at 6.9053 at midday, 22 pips stronger than the previous late session close and 0.02 percent firmer than the midpoint.

The spot yuan continued to trade within a narrow range on Wednesday, but trading volume rose, traders said, suggesting some institutions may take advantage of the slight price swings to earn quick profits.

The daily trading volume stood at $18.09 billion as of midday, compared with a full day volume of $28.0 billion a day earlier.

"The market was stable, judging from the spot price levels. Dollar supply and demand were balanced," said a trader at a Chinese bank in Shanghai.

"But the market might get cautious if the yuan weakens towards 6.92 per dollar," the trader said, adding there was potential for revival of market expectations of further yuan-depreciation once the spot rate breaches that level.

Some market players said the constant dollar sales by major state banks to meet corporate demand for the greenback helped prevent the yuan spot rate from sinking.

State-owned banks have sold dollars in the forex market regularly since late last year in what traders believe is part of official efforts to prevent the Chinese yuan from falling too fast.

The domestic forex market shrugged off April inflation data, which came in softer than economists' expectations.

China's April producer price inflation cooled more than expected as iron ore and coal prices tumbled further, pressured by fears that domestic demand will not be strong enough to absorb surging supplies of steel.

The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.12, firmer than the previous day's 94.01.

The global dollar index fell to 99.403 from the previous close of 99.658.

The offshore yuan was trading 0.10 percent weaker than the onshore spot at 6.9125 per dollar.

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 7.116, 2.94 percent weaker than the midpoint.

One-year NDFs are settled against the midpoint, not the spot rate.