The Chinese yuan ended a holiday-shortened week just off seven-month highs, jumping sharply higher after China's central bank took aggressive steps to prop up the currency, a move that has left traders and analysts guessing at its motivations. The People's Bank of China (PBOC) already took markets by surprise last week when it announced it would add an as-yet undefined "counter-cyclical" factor to its daily reference point calculations to overcome depreciation expectations.
The yuan ended at 6.8162 per dollar on Friday, up 0.5 percent over the week, a rare spurt for a currency that usually trades in a wafer-thin range. Those heights were reached after the PBOC set the yuan midpoint at 6.8090 per dollar on Thursday, the strongest level since November 10.
The PBOC set the midpoint rate on Friday at an even stronger 6.8070 per dollar. Traders said major state-owned banks were selling dollars, which helped keep the yuan strong. Many market participants believe dollar selling by the biggest state-owned banks in recent weeks has been a key part of government efforts to support the exchange rate.