[SHANGHAI] The yuan edged up against the dollar on Thursday, after the central bank fixed a firmer midpoint as the dollar retreated from its two-month high reached in the previous session.
The market is looking ahead to a speech by Federal Reserve chief Janet Yellen on Friday that will shed more light on whether US interest rates will be raised as early as next month.
"There were bouts of heavy dollar selling in the morning as the dollar continued to slide," said a trader at a Chinese commercial bank in Shanghai.
"I suspect most of the deals are speculative as corporate willingness to buy dollars has not changed." Traders also reported that state-owned banks had been buying dollars in morning trade, in an effort to reclaim the"ammunition" they lost on Wednesday when the yuan hovered near its early February trough.
State-owned banks typically engage in dollar selling activities to shore up the yuan on behalf of the central bank.
The People's Bank of China set the midpoint rate at 6.5552 per dollar prior to market open, 0.22 per cent firmer than the previous fix 6.5693.
Spot yuan opened at 6.5570 per dollar and was changing hands at 6.5574 at midday, up 0.05 per cent from the previous close.
On Wednesday, state radio quoted President Xi Jinping saying that China must press ahead with "supply-side structural reforms" to help unleash growth drivers in the economy.
The offshore yuan was trading only 0.05 per cent softer than the onshore spot at 6.5604 per dollar, suggesting less depreciation pressure on the Chinese currency.
Offshore one-year non-deliverable forwards contracts , considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.7340, or 2.66 per cent weaker than the midpoint.