Traders spoke China's central bank set a stronger yuan midpoint than expected to counter market expectations for a faster depreciation, with big state-owned banks also supporting the yuan by offering dollars.
The People's Bank of China set the midpoint rate at 6.9289 yuan per dollar prior to market open, weaker than the previous fix 6.9028, report says.
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269 pips weaker than the previous late session close and 0.07 percent weaker than the midpoint as the spot market opened at 6.9350 yuan per dollar and traded at 6.9339 at midday.
The U.S. central bank raised the target federal funds rate by 25 basis points to between 0.50 percent and 0.75 percent in a closely watched decision on late Wednesday, but the fact was Federal Open Market Committee members for a median of three more hikes in 2017, up from two previously, driving the dollar higher.
Ngan Kim Man, deputy head of treasury at China Everbright Bank's Hong Kong branch, said tight liquidity in the offshore yuan market was normal seen from a year-end trend, but Beijing's recent measures to manage capital outflows had made it much more expensive to shorten the yuan.
In the past few weeks, has the interbank borrowing rate in the offshore yuan market been elevated . The overnight borrowing rate was fixed at 11.76 percent on Thursday, much higher than 7.32233 percent on Wednesday.