SHANGHAI, June 12 (Reuters) - China's yuan languished near seven-month lows on Wednesday as traders cautiously awaited a U.S. inflation report and Federal Reserve policy decision that would set the near-term course for interest rates.
Prior to the market open, the People's Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1133 per U.S. dollar, slightly firmer than the previous fix of 7.1135.
"There isn't much intra-day fluctuations now, and we are all watching the mid-point rate," said a trader at a foreign bank.
In the spot market, the onshore yuan opened at 7.2520 per dollar and was changing hands at 7.2536 at midday, little changed from the previous late session close.
The dollar steadied on Wednesday after hitting a four-week high against peer currencies overnight as market players awaited key U.S. inflation data and the Federal Reserve's updated interest rate projections due later in the day.
The U.S. dollar has rebounded after Friday's stronger-than-expected jobs report raised the prospect of inflation remaining sticky, making the U.S. central bank less likely to cut rates in the coming months.
The yuan was little moved after data showed China's consumer inflation held steady in May while producer price declines eased. The underlying trend suggests Beijing would need to do more to prop up feeble domestic demand and an uneven economic recovery.
"The disinflationary pressure is expected to weigh on domestic consumption," said Ken Cheung, director, FX strategy at Mizuho Securities. "Bolder stimulus measures are needed to support inflation, consumption and the job market simultaneously, alongside the recovery in the housing market."
Traders were also taking a cautious stance after Bloomberg News reported on Tuesday that the Biden administration is considering further restrictions on China's access to chip technology used for artificial intelligence, citing people familiar with the matter.
"At this point, it is still unclear when the final decision would be made but we stay cognizant that rising U.S.–China tensions building into the election season can be a negative factor leading to a creep up in the USDCNH (the dollar against offshore yuan)," said Maybank in a note.
The global dollar index remained steady around 105.3. The offshore yuan was trading at 7.2685 per dollar. (Reporting by Shanghai Newsroom Editing by Shri Navaratnam)
