SHANGHAI: China’s yuan firmed on Wednesday, recovering from a three-month low hit in the previous session on growing signals Beijing will provide more support to shore up growth in the struggling economy.

Traders were also eyeing minutes from the Federal Reserve’s July meeting due later in the day for any new clues on how large the central bank’s interest rate hike is likely to be in September.

The People’s Bank of China set the midpoint rate at 6.7863 per dollar prior to market open, weaker than the previous fix 6.773.

In the spot market, the yuan opened at 6.7800 per dollar and was changing hands at 6.7711 at midday, 179 pips firmer from the previous late session close.

China will step up policy support for the economy, state media quoted Premier Li Keqiang as saying on Tuesday, a day after data showed growth unexpectedly slowed last month.

Yuan slides to a 3-month low as rate cuts fuel China growth worries

“In our view, the meeting highlighted the urgency to fuel the recovery momentum but the focus remained on the implementation of existing pro-growth measures, instead of introducing new growth initiatives,” said Ken Cheung, Chief Asian FX Strategist at Mizuho Bank.

News that China will guarantee new onshore bond issues by a few select private developers to support its embattled property sector helped ease concerns over the property sector rout, Cheung added.

Analysts from Maybank see risks of yuan weakness growing, due to “a lethal combination of deteriorating macro backdrop and geopolitical tensions ahead of key political events such as the Party Congress and the US mid-term election.”

Ding Muqiao, analyst at China Merchants Bank, expected the currency to trade between 6.5 and 6.9 in the third quarter, “if the impact of the epidemic is relatively under control and the geopolitical situation does not deteriorate severely.”

The global dollar index fell to 106.427 from the previous close of 106.5. The offshore yuan was trading at 6.7802 per dollar.