SHANGHAI: China's yuan edged lower on Monday after the central bank set a slightly weaker midpoint to reflect the dollar's global rally, traders said. Spot yuan closed at 6.2158 per dollar, down 0.04 percent from Friday's close of 6.2135 after the People's Bank of China let the currency weaken 0.03 percent in its midpoint . Volume was sluggish at $9.6 billion. Globally, the dollar index rose 0.6 percent in Asian morning trade after euro zone finance ministers wanted Cypriots to pay up to 9.9 percent of their deposits in return for a 10 billion euro ($13.07 billion) aid package. If approved by the island's parliament on Monday, it will be the first time savers have had to foot part of the bill for a European bailout, raising fears that the model could become a precedent for future bailouts in the euro zone. "The yuan could have fallen much more due to the dollar's rally had the PBOC not maintained its midpoint largely stable," said a trader at a major Chinese commercial bank in Shanghai. "The central bank's efforts to keep the yuan largely stable for now underlines market expectations that the yuan is likely to remain large unchanged in the near term." The PBOC appears to be taking a wait-and-see approach in terms of a response to the weakening of Asian currencies, notably the Japanese yen. The central bank has so far not pulled the yuan weaker to offset the impact of the weaker Japanese currency, but it has also kept a lid on market forces that might otherwise push the yuan higher. Traders expect the yuan to hold steady in the weeks ahead, fluctuating between 6.21 and 6.24. But if the yen and other Asian currencies fall much further, some traders predict the PBOC could force the yuan weaker by as much as two percent.

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