China sets yuan at much stronger fixing than markets expected

A China yuan note is seen in this illustration photo May 31, 2017. REUTERS/Thomas White/Illustration/File photo

SHANGHAI  — China’s central bank set the yuan fixing at the widest gap against Reuters’ estimate in nearly five months, as authorities step up efforts to prevent sharp declines in the currency.

Prior to the market’s opening, the People’s Bank of China (PBOC) set the midpoint rate at 7.0948 per U.S. dollar, around which the yuan is allowed to trade in a 2-percent band.

The fixing came in 1,311 pips stronger than a Reuters’ estimate of 7.2259, the widest gap since November 2023.

READ: How China talked markets out of a run on the yuan

The yuan slumped to a four-month low last Friday, and the PBOC had continuously set a stronger-than-expected fixing rate to support the currency.

“We expect PBOC to guard against further CNY weakness for now and smooth any sharp jumps in the CNY/CNH after witnessing the market reaction last Friday,” said Alex Loo, macro strategist at TD Securities.