China’s central bank sets yuan midpoint fix at highest since August 8

The People’s Bank of China’s (PBOC) set its daily midpoint fix for the yuan on Wednesday at 7.0080 per dollar — its strongest since August 8.

That comes a day after the currency traded below the historical support level of 7 against the greenback for the first time since that same month.

″(The yuan fix) was much stronger than what we were expecting. It was much stronger versus market expectations,” Divya Devesh, Asia foreign exchange strategist at Standard Chartered Bank, told CNBC.

Recent reports suggest positive developments have been made on the trade front as the U.S. and China work toward a deal. Beijing has reportedly asked Washington to remove tariffs slapped on Chinese exports in September, as part of a so-called phase one trade deal.

“The probability of a September (tariff) rollback has obviously increased in the last 48 hours,” Devesh said. “I think today’s dollar-China fix at 9:15 (a.m. HK/SIN) was a very important signal.”

Every morning, the Chinese central bank’s sets a midpoint for the yuan on the mainland. Also known as the onshore yuan, the currency is allowed to trade within a narrow band of 2% above or below the day’s midpoint rate.