SHANGHAI: China’s yuan firmed on Monday, underpinned by corporate demand, while signs suggesting policymakers have grown increasingly uncomfortable with the currency’s recent rally prompted some investors to trim their bullish bets.

Demand from companies to convert their foreign exchange into yuan largely offset a rising dollar, a weaker-than-expected official yuan midpoint rate and a proposal asking banks to cap the size of their proprietary trading accounts, traders said.

Chinese companies traditionally have higher yuan demand for various payments in the last two months of the year, which could continue to lend support.

Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.3952 per dollar, 127 pips or 0.2% weaker than the previous fix of 6.3825. The fixing was also weaker than market projections, and it was 72 pips softer than Reuters estimate of 6.3880 per dollar.

“Going forward, China’s central bank will continue setting USD/CNY with an upward bias if needed to curb speculation in our view,” Gao Qi, FX strategist at Scotiabank, said in a note.

In the spot market, the onshore yuan opened at 6.3908 per dollar and was changing hands at 6.3841 at midday, 25 pips firmer than the previous late session close on Friday.

Sources told Reuters on Friday the Foreign Exchange Market Self-Discipline Mechanism has proposed that commercial banks cap the volume of their proprietary trading accounts, with many market participants interpreting it as a move to limit financial institutions’ speculation on the yuan.