Supported by China's central bank raising short term interest rates, the yuan firmed on Thursday as the dollar lost ground all round after the Federal Reserve raised its policy rate while sounding less hawkish about future interest rate increases.
The People's Bank of China set its official yuan midpoint at 6.8862 per dollar prior to the market open on Thursday, 253 pips or 0.37 percent firmer than the previous fixing, the biggest percentage rise in nearly two months.
In the spot market, the yuan opened at 6.8950 per dollar and was changing hands at 6.8937 at midday, 198 pips, or 0.29 percent, firmer than the previous late session close but 0.11 percent weaker than the midpoint.
The offshore yuan was trading 0.34 percent firmer than the onshore spot at 6.87 per dollar.
Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 7.092, -2.90 percent away from the midpoint. One-year NDFs are settled against the midpoint, not the spot rate.
China's central bank raised short-term interest rates on Thursday morning in what economists said was a bid to stave off capital outflows and keep the yuan currency stable after the Fed raised US rates overnight.