The yuan was flat on Friday, but the Chinese currency was set to weaken against the dollar for a third consecutive week, under pressure from economic weakness in China and pared bets on U.S. rate cuts. The onshore spot yuan was changing hands at about 7.1960 at 0400 GMT, little changed from the previous late session close, after the People's Bank of China (PBOC) set a firmer midpoint rate.

"The PBOC has stepped up its efforts to restrain USD/CNY through the daily fix lately, and this is keeping a lid on USD/CNY at the 7.20 level, but I think it should give way to the upside soon," Alvin Tan, head of Asia FX strategy at RBC Capital Markets, said in a note. For the week, the yuan has weakened about 0.4% against the dollar, and was on track for a three-week losing streak. Sentiment has been curbed by the latest readouts on economic and population trends in China, which highlight the immense long-term challenges ahead for the world's second-largest economy.

The yuan weakness also comes against the backdrop of a rebounding dollar, as traders pare back expectations of early U.S. rate cuts amid rising geopolitical tensions. "We should continue to keep in mind that the attacks on the Red Sea continues to put global trade and supply chain at risk and to some extent, potentially add to inflation pressures," Maybank said in a note. Chang Wei Liang, FX and credit strategist at DBS, said a slew of resilient U.S. economic data and the relative outperformance of U.S. equities had also contributed to the greenback's strength. But Liang said he was not pessimistic on the yuan because he was betting China would provide more support to aid its struggling economy. "We maintain a constructive outlook on the RMB amid the pipeline of stimulus," he said.

The yuan market at 0414 GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 0.01% 7.1167 7.1174 Spot yuan 7.196 0.00% 7.1959 Divergence from midpoint* 1.11% Spot change YTD -1.36% Spot change since 2005 revaluation 15.02% *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% from official midpoint rate it sets each morning. OFFSHORE CNH MARKET Instrument Current Difference from onshore Offshore spot yuan * 7.212 -0.22% Offshore non-deliverable 7.022 1.35% forwards ** *Premium for offshore spot over onshore **Figure reflects difference from PBOC's official midpoint, since non-deliverable forwards are settled against the midpoint. . (Reporting by Shanghai newsroom; Editing by Jamie Freed)