SHANGHAI: China’s yuan held steady against the US dollar as the central bank skipped interest rate cuts in its market operations on Monday, while offshore yuan funding costs surged to their highest in nearly four months.

The People’s Bank of China (PBOC) kept benchmark lending rates unchanged at its monthly fixing on Monday, matching market expectations, with authorities seen as having limited scope for monetary easing amid downward pressure on the yuan.

The decision came after the central bank surprised markets last week by maintaining its medium-term lending facility rate.

Meanwhile, offshore yuan liquidity has shown signs of tightness. Hong Kong’s offshore yuan overnight HIBOR - a measure of offshore yuan liquidity conditions - jumped to 4.95045%, the highest since Sept. 26.

Surges in yuan funding costs have also made it more expensive for investors to short the yuan.

Prior to market open on Monday, the central bank set its midpoint rate, around which it allows the yuan to trade in a 2% band, at 7.1105 per dollar, 62 pips firmer than the previous fix of 7.1167, and the strongest level in a week.

The spot yuan opened at 7.1940 per dollar and was changing hands at 7.1955 at midday, 23 pips weaker than the previous late session close.

The global dollar index fell to 103.171 from the previous close of 103.288.