China's top leaders late Wednesday pledged to boost domestic demand and consumption as the coronavirus pandemic pressures the world's second-largest economy, state media reported.
Weighing against this, however, was the central bank's weaker yuan midpoint guidance rate
The weaker fixing suggests the PBOC wants to keep yuan strength in check, said a Shanghai-based trader at a Chinese bank who sees the currency steadying near the 7.05 barrier. Expectations of economic support measures earlier in the week sent the yuan surging to its one-week high.
"China has clearly stated that spot USD-RMB will oscillate around 7.00," HSBC analysts wrote in a note. "This stability preference is consistent with its past FX policy choice during turbulent periods (1997 and 2008)."
The onshore yuan
Christy Tan, head of markets research for Asia at National Australia Bank, said the PBOC's balanced approach has kept the yuan within its current narrow range.
"The PBOC is not holding tight the reins of monetary policy and resistant towards rate cuts, but at the same time it is not going to go full force to flush the market with liquidity," she said.
The dollar index <=USD> stood at 100.09, pretty much flat from the previous close of 100.12. But Tan warned that could change.
"Where the dollar goes is a big risk for the CNY," she said. "The worse (U.S. economic) data gets, the more support there is for the dollar, as everybody gets out of equities, bonds and goes into safe havens."
The coronavirus risk also remains in China, which is reporting more new infections, with 63 on Thursday. China released new measures on Wednesday to prevent asymptomatic "silent carriers" of the virus.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.07, weaker than the previous day's 94.25.
(Reporting by Noah Sin; Editing by Sam Holmes)
