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China central bank intervening to support yuan via state-owned banks: Traders

China's central bank was suspected of intervening in trading to support the yuan, traders said on Friday (Jan 8). Earlier on, the People's Bank of China strengthened its official rate for the first time in nine trading days.

SHANGHAI: China's central bank was suspected of intervening in trading to support the yuan via state-owned banks, traders said on Friday.

"State-owned banks were offering dollar liquidity around 6.59, suspected to be on behalf of the central bank," said a trader at a European bank in Shanghai. "This happened both today and yesterday."

China's yuan firmed in early trade on Friday after the central bank strengthened its official rate for the first time in nine trading days.

The People's Bank of China (PBOC) set the midpoint rate at 6.5636 per dollar prior to the market open, firmer than the previous fix of 6.5646 and the previous day's closing quote 6.5929.

In spot trade, yuan opened at 6.5700 and was changing hands at 6.5759 in early trade, 170 pips away from the previous close and 0.19 percent away from the midpoint. The spot rate is allowed to trade with a range 2 percent above or below the official fixing on any given day.

The offshore yuan was trading 1.29 percent away from the onshore spot at 6.662 per dollar. 

That is the first time the PBOC has firmed the midpoint against the dollar in 9 trading days, after it allowed the biggest fall in the yuan in five months on Thursday, pressuring regional currencies and sending global stock markets tumbling as investors feared it would trigger competitive devaluations.

(Reporting by Pete Sweeney; Editing by Eric Meijer)