China’s yuan slips after PBOC’s first weaker-than-expected fix since July

China’s yuan retreated from a 13-month peak against the dollar on Thursday, after the central bank set its official guidance rate weaker than market projections for the first time since July.

The move by the People’s Bank of China was seen by some investors as an effort to stabilise the currency and prevent it from rising too fast.

Prior to market opening on Thursday, the PBOC set the midpoint rate at 7.0779 per dollar (HK$7.79), its strongest since October 14, 2024, but 46 pips firmer than a Reuters’ estimate of 7.0733. The spot yuan is allowed to trade a maximum of 2 percent either side of the fixed midpoint each day.

Market participants closely watch the daily midpoint fixing for any subtle signals about PBOC’s official stance on the foreign exchange market.

The central bank has been setting the daily midpoint firmer than market expectations since last November, and Thursday marked the first weaker-than-expected fix since July 1.

The midpoint has been fixed by an average of 327 pips stronger than Reuters’ market-based estimate since April.

“The midpoint was very constrained … and may limit further gains in the spot market,” said a trader at a foreign bank.

The onshore yuan fetched 7.0787 per dollar as of 0225 GMT, down 0.05 percent from the previous late night close. Its offshore counterpart traded at 7.0748.

Reuters