China's yuan was largely flat on Friday as regulators continued to support the currency amid expectations that policymakers will need to unveil more economic support measures soon. Data on Friday suggested the economy was starting 2024 on shaky footing, with persistent deflationary pressures and a slight pick-up in exports unlikely to kindle a quick turnaround in weak domestic activity.

Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate at 7.105 per U.S. dollar, firmer than the previous fix 7.1087. "The fix continues to convey PBOC's desire for a stable yuan amid speculation on near-term monetary policy easing and fears of deflation," Maybank analysts wrote in a note.

China's central bank is expected to ramp up liquidity injections and lower the key interest rate when it rolls over maturing medium-term policy loans on Monday, to give a boost to a sputtering recovery in the world's second-largest economy, a Reuters poll showed. While expectations of more policy easing have been undermining the yuan, the PBoC remains adamant about keeping the currency stable, Maybank analysts said. In the spot market, the onshore yuan opened at 7.1672 per dollar and was changing hands at 7.1627 at midday, slightly stronger from the previous late session close. "The deflationary pressure in China's economy remains as domestic demand is still weak. The property sector continues to weigh on the economy," said Zhiwei Zhang, chief economist at Pinpoint Asset Management. "Exports as a pillar for growth in China are not strong enough to boost overall domestic demand. Support from fiscal policy expansion is critical," he said. The dollar also held steady against peer currencies on Friday, as investors weighed higher-than-expected U.S. consumer price inflation against market bets that the Federal Reserve will cut rates as soon as March. The global dollar index fell to 102.217 from the previous close of 102.291. The offshore yuan was trading at 7.1708 per dollar.

The yuan market at 4:03AM GMT: ONSHORE S

POT: Item Current Previous Change PBOC midpoint 0.05% 7.105 7.1087 Spot yuan 7.167 0.06% 7.1627 Divergence from midpoint* 0.81% Spot change YTD -0.91% Spot change since 2005 revaluation 15.55% Key indexes: Item Current Previous Change Thomson Reuters/HKEX 0.0 CNH index Dollar index 102.217 -0.1 102.291 *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 * -0.11% 7.1708 Offshore non-deliverable 1.80% forwards 6.9795 ** *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 Kim Coghill)