[SHANGHAI] China's yuan weakened marginally on Thursday as traders took profits on early gains, despite the People's Bank of China setting a firmer fix.
The PBOC set the midpoint rate at 6.6255 per US dollar prior to market open, firmer than the previous fix 6.653.
The yuan was up slightly in early morning trade on a stronger midpoint fixing by the central bank, but weakened in the late morning in what traders said was mild profit taking.
Analysts were mostly sanguine on the yuan's trajectory a year after an unexpected 1.8 per cent devaluation which set off six months of strong capital outflows and caused deep concern in overseas markets on the health of China's economy and sparked concerns of competitive devaluations.
"In the past year, CNY depreciated by 6.9 per cent against the USD, and weakened by more than 10 per cent versus a basket of currencies," said Zhou Hao, senior emerging markets economist at Commerzbank in Singapore.
"CNY has stabilised somewhat recently as capital outflows have eased and the market has adjusted the expectations on Fed's rate hike process. Of course, the strict capital control measures have been working, which implies that China's capital account liberalisation is still far away from us."
The spot market opened at 6.6359 per US dollar and was changing hands at 6.6429 at midday, 29 pips away from the last close and 0.26 per cent away from the midpoint. The spot rate is currently allowed to trade with a range 2 per cent above or below the official fixing on any given day.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 95.08, firmer than the previous day's 94.96.
The global dollar index rose to 95.722 from the previous close of 95.65.
The offshore yuan was trading 0.10 per cent weaker than the onshore spot at 6.6498 per US 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 6.776, 2.22 per cent weaker than the midpoint.
One-year NDFs are settled against the midpoint, not the spot rate.