China's yuan weakened against the dollar on Tuesday, dragged down by dollar demand from individuals and a slightly stronger greenback, traders said. Markets were also awaiting the release of January foreign exchange reserve data expected later in the day. China is expected to report that foreign exchange reserves fell for the seventh straight month in January but at a much slower pace as authorities tightened controls on capital outflows and the surging US dollar lost some steam.
The People's Bank of China set the yuan's midpoint reference rate at 6.8604 per dollar prior to the market open, firmer than the previous fix 6.8606.
In the spot market, the yuan opened at 6.8660 per dollar and was changing hands at 6.8742 at midday, 103 pips weaker than the previous late session close and 0.20 percent softer than the midpoint.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.57, firmer than the previous day's 95.52.
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 7.082, 3.13 percent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate.