businesses looked to settle their dollar-denominated bills ahead of China's Lunar New Year holiday.

A partial shutdown of the US government continued to pressure the dollar, pushing the global dollar index lower. A White House economic adviser said the US economy could see zero growth in the first quarter.

At midday in Asia on Thursday, the index was trading at 96.073, weaker than the previous day's close of 96.123, but up from Wednesday's intraday lows.

Weakness in the greenback prompted Chinese corporate demand for dollars in early trade on Thursday, said a Shanghai-based trader.

"Some clients took the opportunity to buy dollars for month-end settlements a bit early, given that we're close to the Lunar New Year," he said.

China's financial markets will be closed over the week-long national holiday period, which starts on Feb. 4. Investors should expect low volume next week, with possible volatility in the offshore yuan during the break if global markets see big swings, the trader added.

But despite earlier losses, the yuan found support later in the morning as banks bet on further yuan appreciation on the back of a declining dollar, said a second trader in Shanghai.

Onshore spot yuan was changing hands at 6.7866 at midday, 44 pips stronger than the previous late session close and 0.09 percent softer than the midpoint, after opening at 6.7896 per dollar.

Prior to the open, the People's Bank of China set the currency's daily midpoint rate at 6.7802 per dollar, firmer than the previous fix of 6.7969.

Mixed trade war news overnight had little impact on the currency. US President Donald Trump said on Wednesday that China "very much wants to make a deal" and the US "is doing very well" in the talks.

Also on Wednesday, a top Chinese regulator said market pressure could force the US into a deal because Trump measures his success "by the rise and fall of the Dow Jones average".

But White House advisers stressed that Washington will not budge on the key question of intellectual property rights. Chinese Vice Premier Liu He is set to visit Washington at the end of January for fresh talks, which some market players believe could help to support the yuan.

"The fact that Liu He is going, there must be news out of his trip. We are optimistic," said the second trader.

The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.31, slightly weaker than the previous day's 94.35.