The yuan rebounded against the dollar in the spot and forwards markets on Wednesday as the US currency weakened globally, and after suspected indirect intervention by the central bank to support the yuan. Before trade began, the Chinese central bank set the yuan's daily mid-point against the dollar at 6.8415, down slightly from Tuesday's 6.8400, in response to overnight strength of the dollar against major currencies.
But as the dollar pulled back globally during the day against the majors and a range of Asian currencies, spot yuan bounced to close at 6.8380, just off its intra-day high of 6.8376. That was up from Tuesday's finish of 6.8450. The central bank had already signalled at the close on Tuesday that it did not want the yuan to enter any strong downtrend against the dollar, apparently because that could prompt capital outflows.
On Tuesday, the yuan traded below 6.8500 throughout the final three hours of trade before bouncing sharply to close at 6.8450 because of a single trade in the last minute. A similar pattern was seen on Monday last week. Traders said spot yuan was now likely to move narrowly in line with the dollar's global trend, with the central bank preventing any extended moves in either direction.
"The central bank does not want the yuan to depreciate as that would trigger capital outflows, and it doesn't want to see the currency rise too fast as that would hurt the economy," said a trader at a Hong Kong bank in Shanghai. One-year offshore dollar/yuan non-deliverable forwards dropped to 6.6550 late on Wednesday from Tuesday's finish of 6.6860.