SHANGHAI: China’s yuan weakened slightly in subdued trade against the dollar by midday on Tuesday, with the market watching developments on the Korean peninsula.

The People’s Bank of China set the midpoint rate at 6.8833 per dollar prior to market open, weaker than the previous fix of 6.8673.

The spot market opened at 6.8850 per dollar and was changing hands at 6.8852 at midday, 6 pips weaker than the previous late session close and 0.03 percent softer than the midpoint. Traders said yuan trading had been range bound recently at around 6.8850 per dollar.

“The market is stable,” said a trader at a foreign bank in Shanghai, adding a sideways market could persist for some time.

Political uncertainties, including tensions in the Korean peninsular could bring volatility to the foreign exchange market, but some analysts said tight conditions in China’s money market would likely keep the currency stable.

The Shanghai Interbank Offered Rate (SHIBOR) for overnight tenor, a gauge measuring liquidity in China, rose to 2.7514 percent, the highest level in two years. And Tuesday’s rate was 3.57 basis points higher than the previous close.

The seven-day and 14-day rates also showed upward movements on Tuesday.

The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 93.81, firmer than the previous day’s 93.78.

The global dollar index rose to 99.145 from the previous close of 99.092.

The offshore yuan was trading 0.01 percent firmer than the onshore spot at 6.8848 per 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 7.0665, 2.59 percent weaker than the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.—Reuters