China's yuan rebounds to close at strongest in nearly a week

HONG KONG/SHANGHAI: China's yuan  edged off 10-year low on Thursday to end at 6.9496 per dollar, its highest onshore close in nearly a week.

The onshore yuan fell 1.5 percent in October, it seventh straight monthly loss and the longest such losing stream since the exchange rate was unified in 1994.

But if it finishes the late night session at the domestic closing level, it would have gained 0.35 percent for the day, the biggest one-day strengthening since Oct.10.

"The move in the yuan was following the declines in the dollar index," said a trader at a Chinese bank.

The global dollar index, a gauge that measures the unit's strength against six other major currencies, fell more than 0.63 percent on Wednesday.

The People's Bank of China set the midpoint rate at 6.967 per dollar prior to market open, weaker than the previous fix of 6.9646. But it was 37 pips firmer than Reuters' estimate of 6.9707.

A second trader at a foreign bank said the firmer-than-expected official midpoint set by the central bank prompted dollar selling offshore in afternoon trade.

The offshore yuan traded at 6.9460 as of 0919 GMT, firming from its previous close of 6.9750.

Both traders said they had not seen major Chinese state-owned banks, who often act on behalf of the central bank, selling dollars to support the yuan.

Still, short bets against the Chinese yuan rose to their highest since early August.

And with the Sino-U.S. trade war raging, markets remained focused on whether authorities will allow the Chinese currency to test and break through the closely watched support level of 7 to the dollar for the first time since the financial crisis.

The latest Reuters poll showed strategists are roughly split over whether China will allow the yuan to weaken to that level or beyond in a year, though some noted the central bank would not allow it to breach that level easily.

"Only if the dollar index sits consistently above 97 will we see enough pressure to take the yuan to 7," he said. "I don't see that happening," said a Shanghai-based trader with a local bank."

Indeed, most analysts expected a modest rebound in the yuan in a year's time, mostly because they foresee the dollar losing steam.