China's yuan weakened against the dollar on Wednesday as the central bank fixed a weaker midpoint, while traders said demand for dollars was lifted by individuals paying credit card charges after travelling on a long weekend holiday. The People's Bank of China set the midpoint rate at 6.1345 per dollar prior to market open on Wednesday, 0.07 percent weaker than the previous fix at 6.1305.
The spot market opened at 6.1985 per dollar and was changing hands at 6.2050 at midday, 0.11 percent or 67 pips weaker from the previous close and 1.15 percent weaker from the midpoint.
The spot rate is currently allowed to trade with a range 2 percent above or below the official fixing on any given day.
The market was closed on Monday on the Chinese Tomb Sweeping Day holiday. Many Chinese spent the long weekend outside China for tourism, traders said. "Those who spent the holiday abroad now need to buy dollars to pay off their credit cards," said a trader at a Chinese commercial bank in Shanghai.
"The yuan has now entered a period of two-side fluctuations and its value is likely to move in a narrow range in near term," Huang Yi, an analyst at Guangfa Bank, wrote in a research note.
Indeed, the currency has seen greater two-side volatility since mid-March, thanks to the central bank's periodical intervention in an attempt to deter a temporary one-side bet on the currency's depreciation this year due in part to the dollar's strength in global markets.
Huang forecast the yuan will be trading within the range between 6.15-6.30 per dollar for the rest of 2015's first half.
The offshore yuan, at 6.2062 per dollar by midday, was trading 0.02 percent weaker from the onshore spot.