SHANGHAI: China’s yuan traded at a five-month low against the dollar on Monday, but the currency avoided any steep losses as Beijing continued to set a strong official guidance rate.

Earlier in the day, the central bank kept a key policy interest rate steady as widely expected when rolling over maturing medium-term loans, and drained some cash from the banking system through the bond instrument.

The yuan was trading at 7.2382 per dollar at 0248 GMT, barely changed from the previous close but very close to the weaker side of the 2% daily trading band. The currency hit a five-month low of 7.2386 in early trade.

The central bank’s daily benchmark fixings and support from state-owned banks have slowed the pace of declines in the yuan, which is down 1.9% this year.

China’s relative low yields versus other developed economies and outflows of foreign investment from an anaemic stock market have maintained pressure on the currency.

Prior to the market’s opening, People’s Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.0979 per US dollar, 1499 pips stronger than Reuters’ estimate.

The spot yuan opened at 7.2355 per dollar and was changing hands at 7.2382 at midday, 10 pips weaker than the previous late session close and 1.98% weaker than the midpoint.