China sets yuan midpoint at 6-week low, but far stronger than expected

SINGAPORE: China's central bank set the yuan midpoint at a six-week low against the dollar on Thursday, but the official guidance continued to be far stronger than market projections. The People's Bank of China (PBOC) set the midpoint rate , around which the yuan is allowed to trade in a 2% band, at 7.2076 per dollar prior to market opening, 90 pips weaker than the previous fix of 7.1986, the weakest since July 6.

However, the weaker fixing came in much stronger than market projections, traders and analysts said. It was 971 pips firmer than Reuters' estimate of 7.3047, the biggest discrepancy in this current round of yuan depreciation. Market participants widely take the firmer-than-expected midpoint as an official sign of authorities' rising discomfort with the yuan's weakness.