(Bloomberg) -- China’s yuan ended a record slump against its peers after the central bank set the fixing at a stronger-than-expected level for a third day.
The Bloomberg replica of the CFETS RMB Index, which tracks the yuan versus a basket of 24 trading partners’ currencies, rose for the first time in sixteen sessions. The People’s Bank of China set its daily fix at 6.8992 a dollar on Wednesday. That was stronger than the 6.9063 average of forecasts by 21 traders and analysts surveyed by Bloomberg.
The central bank’s recent fixings have helped stabilize the currency amid rising trade tensions with the U.S. The yuan has tumbled about 2.5% this month, making it one of the world’s worst-performing major currencies. Earlier this week State Administration of Foreign Exchange head Pan Gongsheng said China has the experience and policy tools to cope with fluctuations in the forex market.
A fixing stronger than 6.9 once again shows China’s policy makers really don’t want the currency to weaken beyond that level, said Khoon Goh, head of Asia research at Australia & New Zealand Banking Corp. “This is the counter-cyclical adjustment measure that Pan Gongsheng was talking about.”
The PBOC’s upcoming bill issuance in Hong Kong appears intended to stabilize the offshore yuan given bearishness and the gap with the currency onshore, said Ken Cheung, senior FX strategist at Mizuho Bank Ltd. The central bank’s intention to keep yuan stronger than 7 per dollar is apparent, he added.
The yuan’s recent slide has investors wondering whether it will breach that level for the first time since the financial crisis. Citigroup Inc. has said the PBOC will keep the currency stronger than 7 to maintain stability in its financial markets.
China has said it won’t devalue the currency to make its exports more competitive, while a weaker yuan is already hurting foreign inflows to China’s bonds and stocks. Outflows from China’s equities via trading links with Hong Kong are in line to set a monthly record in May.
The Bloomberg CFETS RMB Index Tracker rose 0.05% to 93.64 on Wednesday. It retreated 2.2% during its 15-session slide, while a dollar gauge was little changed.
The yuan traded steady at 6.9014 a dollar as of 5:32 p.m. in Shanghai. The offshore rose 0.14% to 6.9277.
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