(Bloomberg) -- China set its daily reference rate for the yuan at a stronger-than-expected level Thursday, with the central bank perhaps signaling efforts to support the currency following recent weakness.
The PBOC put the fixing at 7.0692 yuan per dollar, 105 basis points stronger than the average forecast of analysts surveyed by Bloomberg. The spread was the most since Feb. 3, the first day of trading in China following a Lunar New Year break extended in response to the coronavirus. The fixing restricts the onshore yuan’s daily moves to 2% on either side of it.
Pressure on the yuan during an up-and-down session, with the Chinese currency strengthening 0.29% as of 6:08 p.m. in Shanghai to 7.0888 per greenback. The yuan weakened 0.67% Wednesday, worst among emerging-market currencies tracked by Bloomberg, while most others rallied following unprecedented stimulus measures in the U.S.
“The stronger fixing today could be a signal that the authorities do not want the yuan to weaken too far from here,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. “However, attempts to temper yuan weakness is probably more to dampen the volatility rather than to defend any particular level.”
U.S. dollar purchases spiked in the onshore yuan market Wednesday, partly because large tech companies did heavy buying, according to three traders who wished to remain anonymous as they are not authorized to speak to the media. They added onshore purchases were also boosted by a report that the People’s Bank of China could cut its benchmark deposit rate in the coming days, while offshore buying rose as Chinese companies repurchased dollar bonds that had hit new lows.
Meanwhile, several traders said large Chinese banks provided U.S. dollars to the market Thursday, when the yuan weakened near 7.12. That level was briefly breached in afternoon action before the Chinese currency rebounded.
(Updates yuan level in third paragraph, adds comments in paragraphs five and six)
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