China's yuan eases against US dollar, dragged by narrowing yield advantage

China's yuan eased against the dollar on its first trading day of 2022, after posting full-year gains for two straight years, with investors worried that a shrinking yield gap between the world's two largest economies could trigger capital outflows.

The yield spread between Chinese and U.S. 10-year government bonds fell to its narrowest since mid-2019 early on Tuesday, with Treasury yields buoyed by expectations of possible U.S. rate hikes this year.

Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate at a two-week low of 6.3794 per dollar, 37 pips weaker than the previous fix 6.3757.

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