China's yuan firmed against the dollar on Wednesday, supported by a surge in onshore forwards late in the afternoon on expectations of tighter liquidity over the long Lunar New Year holidays. In the spot market, the yuan clawed back early losses. It opened at 6.8588 per dollar and settled at 6.8342 at 0830 GMT, 159 pips firmer than the previous late session close.
The onshore overnight implied deposit rate for yuan jumped to 22.035 percent on Wednesday, the highest since data became available in April 2007. On Tuesday, the rate ended at 4.357 percent.
Primary money rates in the interbank market also surged on Wednesday.
The volume-weighted average rate of the benchmark seven-day repo traded in the interbank market, considered the best indicator of general liquidity in China, was 2.7595 percent on Wednesday afternoon, around 35 basis points higher than the previous closing average rate.
The yuan's daily official midpoint, guided by the PBOC, was fixed at a more than two-month high of 6.8525 per dollar early in the day, 467 pips or nearly 0.7 percent stronger than the previous fix of 6.8992. The offshore yuan was trading 0.33 percent firmer than the onshore spot at 6.8115 per dollar.
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