SHANGHAI: The yuan was flat on Friday, but the Chinese currency was set to weaken against the dollar for a third consecutive week, under pressure from economic weakness in China and pared bets on US rate cuts.

The onshore spot yuan was changing hands at about 7.1960 at 0400 GMT, little changed from the previous late session close, after the People’s Bank of China (PBOC) set a firmer midpoint rate.

The yuan weakness also comes against the backdrop of a rebounding dollar, as traders pare back expectations of early US rate cuts amid rising geopolitical tensions.

“We should continue to keep in mind that the attacks on the Red Sea continues to put global trade and supply chain at risk and to some extent, potentially add to inflation pressures,” Maybank said in a note.

Chang Wei Liang, FX and credit strategist at DBS, said a slew of resilient US economic data and the relative outperformance of US equities had also contributed to the greenback’s strength.