China’s yuan fixing is back in focus, with a run of surprises moving the market in recent days.
The central bank set its reference rate—which limits onshore moves to 2 percent on either side—at a weaker than expected level for the third day in a row on Wednesday. The rates, and the removal of a reserve requirement rule on the trading of foreign-exchange forwards, are fuelling bets that authorities want to limit gains after the onshore yuan surged more than 4 percent against the dollar in the three months.
The People’s Bank of China set Wednesday’s fixing at 6.5382 per dollar, compared with the average forecast of 6.5355 in a Bloomberg survey of 19 traders and analysts. The authorities have had greater opportunity to sway the fixing either way since May, with the introduction of a “counter-cyclical factor” to the rate-setting mechanism.
“The PBOC still wants a relatively stable yuan,” said Nathan Chow, a Hong Kong-based economist at DBS Group Holdings Ltd. “Even if it strengthens or weakens, the pace needs to be controlled, and in an orderly and gradual manner. This will be easier for exporters to manage risks. The market expectation is that there should be no big changes before the party congress next month.”