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© Bloomberg. A man rides a bicycle past the People’s Bank of China (PBOC) headquarters in Beijing, China, on Friday, June 7, 2019. China’s central bank governor said there’s

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(Bloomberg) — China’s central bank set its daily yuan fixing slightly weaker than analysts expected after officials earlier acted to restrain the currency’s rally.

The People’s Bank of China’s reference rate was fixed at 6.7126 per dollar on Monday, compared with the average estimate of 6.7073 in a Bloomberg survey. On Saturday, the PBOC moved to make it cheaper to bet against the currency. The was down 0.7% at 9:17 a.m.

The yuan surged about 1.6% on Friday when the currency traded for the first time this month following National Day holidays, extending its best quarterly advance in 12 years. A recovering economy, a hefty yield premium in sovereign debt over Treasuries and the prospect of a U.S. presidential victory by Democrat nominee Joe Biden are all providing tailwinds for a currency that earlier this year was near its lowest level since 2008.

Effective Monday, financial institutions no longer need to set aside cash when purchasing foreign exchange for clients through currency forwards, according to a statement from the PBOC on Saturday. Back in September 2017, when the PBOC similarly cut the cost to zero following sharp gains, the yuan slumped about 2.5% in the next three weeks.

Banks previously had to hold 20% of sales on some foreign exchange forward contracts, a move imposed two years ago when the currency slumped toward 7 per dollar.

The yuan is the top performer among Asian peers in the past three months through last week, climbing about 4.5% against the dollar. It closed on Friday at about 6.69 per dollar, its strongest level since April 2019.

The reference rate is decided based a formula that takes into consideration the onshore yuan’s official close at 4:30 p.m. on the previous trading day and major currencies’ moves overnight.

©2020 Bloomberg L.P.

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