By midday, the onshore yuan
The People's Bank of China (PBOC) had set the midpoint of the yuan's daily trading band at 6.8936 per dollar prior to market open, weaker than the previous fix of 6.8869.
On Wednesday, the PBOC rolled out a policy tool to spur lending to small and private firms. The targeted medium-term lending facility (TMLF) is the PBOC's latest step to support a slowing economy amid a trade dispute with the United States.
"(The TMLF) does not amount to a rate cut, but it expressed a view - that they are prepared to ease further. They are certainly not deleveraging anymore," said a trader at a foreign bank in Shanghai.
But the central bank chose to keep short-term borrowing rates steady on Thursday as it injected a net 150 billion yuan into money markets through seven- and 14-day reverse repurchase agreements.
"There seems to be significant determination to maintain currency stability because of the ongoing trade negotiations and concerns about the effects on the financial markets and economy. Lowering interbank interest rates would put additional pressure on the currency," analysts at Goldman Sachs said in a note Thursday.
The analysts characterised the TMLF as a "small additional loosening measure" that allows commercial banks to lower lending rates by lowering their cost of funding.
The Thomson Reuters/HKEX Global CNH index <.RXYH>, which tracks the offshore yuan against a basket of currencies on a daily basis edged up to 93.47 from the previous day's 93.45.
The dollar index, which measures the greenback against a basket of major rivals, was less than 0.1 percent weaker at 96.980. <.DXY>
Offshore, the yuan was trading slightly weaker than the onshore currency at 6.9095 per dollar, amid loose market liquidity.
The one-year interbank borrowing rate for offshore yuan
Offshore one-year non-deliverable forward contracts (NDFs)
(Reporting by Andrew Galbraith in SHANGHAI and Noah Sin in HONG KONG; Editing by Jacqueline Wong)
