China's yuan fell slightly against the US dollar on Monday after a weaker official midpoint fixing, and on views that the central bank will stick to a very modest and gradual pace of monetary tightening to avoid hurting economic growth. China's central bank surprised markets by raising short-term interest rates for the third time in as many months last week, in what economists said was a bid to stave off capital outflows and keep the yuan stable after the Federal Reserve raised US rates hours earlier.
The People's Bank of China set the midpoint rate at 6.8998 per dollar prior to market open, weaker than the previous fix 6.8873.
In the spot market, the yuan opened at 6.9060 per dollar and was at 6.9043 as of 0830 GMT, 13 pips weaker than the previous late session close and 0.07 percent softer than the midpoint.
The offshore yuan was trading 0.17 percent firmer than the onshore spot at 6.8928 per dollar as of 0830 GMT.
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 7.114, 3.01 percent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate.