SHANGHAI: China’s yuan held steady against the dollar on the first trading day after the Golden Week holiday, underpinned by a stronger-than-expected official guidance fix, while investors worried about the impact of a firming greenback.

The setting of the onshore fix would be closely watched following the end of China’s Golden Week, said Paul Mackel, global head of FX research at HSBC.

Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade, in a 2% band at 7.1789 per US dollar, 9 pips firmer than the previous fix of 7.1798, and 1156 pips firmer than Reuters estimate of 7.2945.

The spot yuan opened at 7.3050 per dollar and was changing hands at 7.2958 at midday, only 7 pips firmer than the previous late session close.

Higher-for-longer US interest rates, which are buoying the dollar, are becoming a big challenge for the PBOC and have triggered concern about when the PBOC might allow the yuan to weaken gradually, analysts at Goldman Sachs wrote in a note.

“In our view, it is important to watch out for both the duration of USD strength and the divergence between CFETS RMB index and USDCNY spot,” the analysts said.

Reuters estimates the RMB CFETS basket index, a gauge that measures the yuan’s strength versus a basket of currencies, edged up on Monday, hitting a five-month high of 99.67.

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The global dollar index rose to 106.248 from the previous close of 106.044.

The offshore yuan was trading 11 pips weaker than the onshore spot at 7.2969 per dollar.