China's yuan edged down on Friday after the central bank fixed a weaker mid-point and the dollar eased off multi-month lows, but it will likely stay under pressure on corporate dollar demand. Before the market opened, the People's Bank of China set the midpoint rate at 6.7373 per dollar, weaker than the previous fix of 6.7307, which was its strongest in nine months and its biggest one-day rise in percentage terms since June 28.
Thursday's fix reflected the dollar's descent to a 13-month low after the Federal Reserve's meeting earlier this week, where the US central bank's tone was perceived as dovish. The spot market opened at 6.7440 per dollar and was changing hands at 6.7429 at local close, 20 pips weaker than the previous late session close and 0.08 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 93.84, firmer than the previous day's 93.73. The global dollar index fell to 93.76 from the previous close of 93.864. The offshore yuan was trading 0.01 percent weaker than the onshore spot at 6.7435 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 6.8755, 2.01 percent weaker than the midpoint. One-year NDFs are settled against the midpoint, not the spot rate. China takes the official market closing price at 0830 GMT into consideration when it fixes the official guidance rate, while an evening session lasts until 1530 GMT.
The spot rate is currently allowed to trade within a range 2 percent above or below the official fixing on any given day. If the yuan finishes the late night session at the current level, it will have strengthened around 0.34 percent against the dollar for the week, the third straight winning week.