Offshore Yuan Gains Most in Week as China Sends Signal With Fix

(Bloomberg) -- The offshore yuan headed for its biggest gain in a week, after China set the daily reference rate for the onshore currency stronger than expected, stoking bets the government wants to stabilize the exchange rate.

The Chinese currency rose 0.23 percent to 6.8517 per dollar as of 5:10 p.m. in Hong Kong, while the onshore rate gained 0.11 percent. The yuan’s fixing was 0.1 percent stronger than the average forecast in a Bloomberg survey, the biggest gap in two weeks. The People’s Bank of China has set the reference rate stronger than estimates for 17 days in a row.

“The market doesn’t want to bet against PBOC for fear of further supportive policies to stabilize the yuan,” said Tommy Xie, economist at Oversea-Chinese Banking Corp Ltd in Singapore. “Looking ahead, the yuan is likely to trade within a narrow range, unless the trade tensions materially deteriorate or the dollar significantly strengthens.”

Data released Friday showed strengthening of China’s official factory gauge in August, reducing expectations for further monetary easing, supporting the yuan, Xie said.

The offshore yuan tanked 0.67 percent overnight, amid concern the trade dispute with the U.S. is set to worsen. President Donald Trump was said to want to move ahead with tariffs on $200 billion in Chinese imports. China has taken action over the past month to rein in rapid depreciation of the yuan, including strengthening control over the fixing and making it more expensive to short the currency. The yuan has weakened more than 6 percent since mid-June, the worst performer in Asia.

--With assistance from Ran Li.

To contact the reporters on this story: Tian Chen in Hong Kong at tchen259@bloomberg.net;Emma Dai in Hong Kong at edai8@bloomberg.net

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Will Davies, David Watkins

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