SHANGHAI: China's yuan hit its highest level against the dollar since mid- January on Wednesday, breaching a psychologically important barrier, buoyed by a firmer central bank midpoint and massive dollar sales by big state-owned banks, traders said.
Sentiment towards the Chinese currency has been greatly strengthened by suspected central bank intervention in the past two weeks, which markets viewed as the bank persistently signalling its preference for yuan stability.
"Now we feel more confident to sell dollars as we know the authorities' attitude," said a trader at a Chinese city commercial bank in Shanghai.
Spot yuan opened at 6.2400 per dollar, touching an intraday high of 6.2300 in early trade.
It trimmed some gains to change hands at 6.2376 per dollar by late morning, still up 0.2 percent from Tuesday's close and effectively breaching the 6.24, a psychological resistance.
The People's Bank of China (PBOC) showed its intention to keep the currency steady by setting the midpoint firmer for the second day on Wednesday, at 6.1556 per dollar from 6.1585 on Tuesday.
In addition, the high frequency of dollar sales by big Chinese state-owned banks in the past two weeks has led traders to believe the PBOC does not want the yuan to depreciate as quickly as other currencies have under the pressure of the global dollar index's strength.
The yuan has been under heavy pressure since late 2014, hit by China's slowing economic growth and weakness in non-dollar currencies.
The PBOC has intervened to control the pace of the yuan's depreciation, partly by using some big state-owned banks to sell dollars to set a floor, traders said.
On Wednesday, the offshore yuan was trading 0.02 percent weaker than the onshore spot at 6.2388 per dollar.
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