SHANGHAI (Reuters) — China’s central bank set the yuan midpoint at 6.9262 per dollar on Monday in its biggest daily drop in percentage terms in more than six months after a wild ride last week that saw the yuan strengthen by around 1 percent before falling back.
The fix was 594 pips, or 0.86 percent, weaker than the mid-point rate Friday, which was 6.8668 per dollar.
Monday’s official fixing came in at a much firmer level than the market had expected, traders said, with forecasts around 6.9450 per dollar.
Last week, yuan overnight interbank rates in Hong Kong soared pushing the offshore version of the currency, the CNH, to its strongest levels since last January and creating a knock-on effect on the onshore yuan.
China’s foreign exchange reserves fell to near six-year lows by the end of last month but held just above the critical $3 trillion level, the government reported on Saturday, after authorities stepped in to support the weakening yuan ahead of U.S. President-elect Donald Trump’s inauguration.
“The spike of [the] fixing this morning together with the fall of December FX reserves to U.S.$3.01 trillion implies that expectations on RMB depreciation may resume this week,” Tommy Xie, an economist at OCBC Bank in Singapore wrote in a note on Monday.
Some traders said the stronger-than-expected mid-point may have been a result of the mechanism,which eliminates some of the highest and lowest quotes from contributors.