China's yuan weakened against the dollar on Friday and is on course for a second straight weekly loss due to a rising dollar in global markets on growing expectations of a US Federal Reserve interest rate hike next week. The People's Bank of China set the midpoint rate at 6.9123 per dollar prior to market open, firmer than the previous fix of 6.9125.
The spot market opened at 6.9116 per dollar and was changing hands at 6.9123 at midday, 53 pips weaker than the previous late session close and unchanged from the midpoint. For the week, the yuan is set to fall around 0.2 percent against the dollar, booking a second straight weekly loss. The offshore yuan firmed around 0.2 percent to the dollar a day earlier by closing at 6.9031, after hitting a high of 6.9313. The surge in the offshore spot has dampened the onshore market, traders said.
On Friday, the offshore spot was trading 0.09 percent firmer than the onshore spot at 6.9062 per dollar by midday. The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.35, weaker than the previous day's 95.37. The global dollar index rose to 101.91 from the previous close of 101.85.
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 7.1485, 3.30 percent weaker than the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.