China's yuan eased against the dollar on Tuesday, guided by the central bank's weaker midpoint setting one day after the currency's jump. The People's Bank of China set the midpoint rate at 6.513 per dollar prior to market open, 0.02 percent softer than Monday's fix of 6.5118. The spot market opened at 6.5060 per dollar and was changing hands at 6.5127 at midday, weakening 0.29 percent from the previous close.
On Monday, the yuan strengthened 1.2 percent against the dollar. "We have seen increased volatility in the yuan's value against the dollar since late December," said a dealer at an European bank. "The central bank indeed intervened yesterday but overall, increased volatility is in line with the government's intention to reform the currency mechanisms." The offshore yuan was trading 0.04 percent weaker than the onshore spot at 6.5155 per dollar by midday.
The yuan remained flat against the euro at 7.2716. It strengthened 0.4 percent against the Japanese yen , hovering at 5.6788 to 100 yen. In December, Beijing launched an index on the yuan's exchange rate weighted against a basket of trade-related currencies, a move that will eventually loosen the currency's link to the greenback and plays down the impact of the yuan's depreciation against the dollar. While the yuan has steadied in recent weeks, traders noted it is largely due to a broadly weaker dollar and heavy direct and indirect intervention by the central bank, which sold a large amount of foreign exchange in recent months to shore up the currency.