China's yuan fell against the dollar on Friday and weakened past a key psychological level for the first time in one-and-a-half months, as the greenback continued to gain momentum on expectations of higher US interest rates. Traders said the pressure on the Chinese currency was due to growing expectations the Federal Reserve could raise rates as early as this month after a solid run of US economic data and policymakers hinting a rate rise would be appropriate soon.
The People's Bank of China set the midpoint rate at 6.8896 per dollar prior to market open, weaker than the previous fix 6.8809.
The spot market opened at 6.8903 per dollar and was changing hands at 6.9000 at midday after hitting a low of 6.9033, its weakest since January 17, 98 pips softer than the previous late session close and 0.15 percent easier than the midpoint.
For the week, the yuan is set to weaken 0.4 percent against the greenback, its worst weekly performance since mid-December. The offshore yuan was trading 0.10 percent firmer than the onshore spot at 6.893 per dollar. 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 7.103, 3.00 percent weaker than the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.