Yuan Rallies Most in 10 Months as PBOC Strengthens Currency Fix

The yuan rallied after the People’s Bank of China signaled its comfort with the currency’s appreciation via its daily reference rate ahead of the National People’s Congress.

The onshore unit advanced as much as 0.5% to 6.8750 per dollar, to post its biggest jump since May 12. That’s after the central bank strengthened the daily reference rate for the currency by the most since August.

The PBOC’s move came just a day ahead of the the most important annual political event in the country during which policymakers tend to anchor market confidence. The stronger fixing also signals that the PBOC is still comfortable with mild currency appreciation after it for betting against it in the derivatives market on Friday.

“It is possible that they like to have a sense of anchor ahead of important events and this is not out of ordinary indeed,” said Fiona Lim , a senior foreign-exchange analyst at Malayan Banking Berhad.

“The fix certainly seems to be a signal to keep the yuan stable and markets have definitely heeded that warning. May see some sideway actions within the 6.83-6.94 range.”

The offshore yuan rose as much as 0.4% to 6.8751 per dollar on Tuesday morning in Hong Kong.

The PBOC set the yuan fixing at 6.9088 per dollar on Tuesday. The so-called fixing limits the yuan’s move by 2% on either side.