The yuan slipped against the dollar on Wednesday as dollar demand surged after the long Lunar New Year holiday in China last week and after the central bank fixed a weaker midpoint. The People's Bank of China set the midpoint rate at 6.5237 per dollar prior to the market open, 0.16 percent weaker than the previous fix of 6.513. The spot market opened at 6.5300 per dollar and was changing hands at 6.5260 at midday, softening 0.12 percent from the previous close.
"Despite its recent volatility, the yuan is expected to remain stable in general in the near term," said a dealer at a local commercial bank. The offshore yuan was trading 0.04 percent weaker than the onshore spot at 6.5286 per dollar. The yuan edged down 0.1 percent against the euro at 7.2856. It also eased 0.4 percent against the Japanese yen, hovering at 5.7362 to 100 yen.
The PBOC guided the yuan weaker on Tuesday after its strong midpoint helped push the Chinese currency to strengthen 1.2 percent on Monday. On Tuesday, China's central bank issued a slew of measures to increase financial support to its struggling industrial sector, in the latest efforts to counter a prolonged economic slowdown. On Wednesday, a spokesman for the China's commerce ministry said that the country was not witnessing any signs of capital flight and that there was no basis for continued depreciation of the yuan, though traders and economists believe it will remain under pressure as long as economic indicators fail to improve.