China's yuan firmed on Tuesday as major state-owned banks sold dollars, while weak demand by companies for the US currency also offered a helping hand, traders said. The People's Bank of China set the midpoint rate at 6.9468 per dollar prior to the market opening, weaker than the previous fix of 6.9312. "The midpoint was back to normal, and dollar demand by companies was not so strong at current levels, so the market was relatively stable," said a trader at a Chinese bank in Shanghai.
The market was confused by Monday's official guidance rate, which was set at a much firmer level than traders had expected. State-owned banks have offered dollar liquidity regularly over the past two months in what traders believe is part of efforts to support the Chinese yuan from falling too fast.
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