By Noah Sin
HONG KONG, May 23 (Reuters) - The yuan weakened on Thursday as the Sino-U.S. dispute over trade spilled into the technology sector, but the Chinese central bank's firm fixing kept losses in check.
Reuters reported late on Wednesday the U.S. government was considering Huawei-like sanctions on Chinese video surveillance firm Hikvision 002415.SZ over China's treatment of its Uighur Muslim minority, complicating the protracted trade war between the world's two largest economies.
Washington placed Chinese telecoms giant Huawei Technologies HWT.UL on a trade blacklist last week, and is reportedly pressing South Korea to drop using Huawei's equipment, citing security concerns.
The yuan softened, but only mildly, in the wake of these U.S. moves. The spot market CNY=CFXS changed hands at 6.9139 at midday, 71 pips weaker than the previous late session close and 0.21 percent weaker than the midpoint.
Traders said the People's Bank of China's stronger-than-expected midpoint kept the yuan's fall in check. Spot yuan can trade 2 percent either side of the fixing.
The PBOC set the midpoint rate CNY=PBOC at 6.8994 per dollar prior to market open, a touch weaker than the previous fix of 6.8992, but still stronger than the Reuters' estimate of 6.901 per dollar and traders' expectations.
"(PBOC) has been keeping (USDCNY fixing) artificially low, to persuade people from trying (to short the yuan)," said a Hong Kong-based head of forex trading at an international bank.
Central bank jawboning has helped stem downward pressure on the yuan, said a second trader, based in Shanghai. "The renminbi has been relatively stable recently because officials have been outspoken," he said.
Pan Gongsheng, deputy governor of the PBOC, said China will keep the yuan exchange rate within a reasonable and balanced range earlier this week, after Reuters reported that the central bank is keen to keep the currency from hitting the widely watched 7 per dollar handle.
The scheduled meeeting between U.S. President Donald Trump and Chinese President Xi Jinping at the G20 in Japan in late-June is also capping downward pressure on the yuan, leaving it in a tight range, said Carie Li, an economist at OCBC Wing Hang.
"People still have hopes for the G20 meeting. You can't rule out, at this point, that the two sides will not agree to something there," she said.
The next round of U.S. tariffs on Chinese goods could come around the time of the meeting, according to remarks by U.S. Treasury Secretary Steven Mnuchin on Wednesday.
The offshore yuan CNH=D3 was trading 0.29 percent weaker than the onshore rate at 6.9337 per dollar. The global dollar index .DXY rose to 98.134 from the previous close of 98.041.
The yuan market at 0400 GMT:
PBOC midpoint CNY=SAEC
Spot yuan CNY=CFXS
Divergence from midpoint*
Spot change YTD
Spot change since 2005 revaluation
Thomson Reuters/HKEX CNH index
*Divergence of the dollar/yuan exchange rate. Negative number indicates that spot yuan is trading stronger than the midpoint. The People's Bank of China (PBOC) allows the exchange rate to rise or fall 2 percent from official midpoint rate it sets each morning.
OFFSHORE CNH MARKET