Yuan holds steady against dollar as markets await US payrolls

China's yuan traded flat in a tight range against the dollar on Thursday, as investors awaited U.S. jobs data that could shape the Federal Reserve's rate outlook.

The yuan FX_IDC:USDCNY was last 0.02% higher at 6.7865 to the dollar, after trading in a narrow range of 6.7834 to 6.7925.

The offshore yuan traded at 6.7895 yuan per dollar FX:USDCNH, up about 0.07% in Asian trade.

The greenback held steady on Thursday as markets awaited key U.S. non-farm payrolls data, which is expected to show U.S. employers added 110,000 jobs in June, with the unemployment rate holding steady at 4.3%.

The dollar's six-currency index TVC:DXY was flat at 101.37.

"With the market still trying to figure out the Fed's potential new framework, it is likely to see some increased policy uncertainty and volatility" in Asian currencies, analysts at MUFG said in a note.

The Politburo meeting will be one of the main domestic drivers for yuan this month, and policy supports for the economy could anchor a mild strengthening bias against the dollar, they added.

Prior to the market opening, the People's Bank of China set the midpoint rate FX_IDC:USDCNY at 6.8088 per dollar, off the more than three-year high seen in the previous session and 159 pips weaker than a Reuters estimate.

The spot yuan is allowed to trade a maximum of 2% either side of the fixed midpoint each day.

The central bank has been consistently setting the midpoint guidance weaker than market projections as it manages the pace of appreciation, traders and analysts said.

The official trade-weighted CFETS index (.CFSCNYI) rose to 102.88, the highest level since July 19, 2022, according to a Reuters estimate.

Key onshore vs offshore levels:

• Overnight dollar/yuan swap onshore -4.39 pips vs. offshore -4.39

• Three-month SHIBOR (SHIBOR=) 1.4 % vs. 3-month CNH HIBOR 1.7 %

LEVELS AT 03:03 GMT GMT