Were you able to spot the odd movement out in Yuan in last two days?

If not, keep reading.

Yesterday, People's Bank of China (PBoC) unexpectedly (not surprising though given the state of the economy) reduced reserve requirement ratio (RRR), that is the banks need to hold cash with the central bank, by 0.5%.

Due to timing surprise, Yuan weakened immediately after the announcement and slumped from 6.543 per Dollar to close to 6.56 per Dollar in the offshore market. This move however isn't unusual given currency has tendency to weaken when central bank eases.

Yuan remained elevated and closed at 6.551 in onshore market and at 6.554 in offshore market. This is not unusual too given the fact that Dollar was strong overnight against most currencies, except for few like Yen.

PBoC, this morning fixed Yuan stronger against Dollar. In onshore central mid-point from which the currency is allowed trade within a band of 2%, was fixed stronger by 0.1% to 6.5385. Now that was odd, given the facts -

• Spot Yuan was weaker in overnight trade.
• Dollar was stronger and held firm against Yuan.
• To remain stable against a basket of currencies, Yuan should have weakened.

Well it seems to be quite a confusing fixing formula that PBoC has been using or is it that PBoC has become weaker Yuan averse.

Yuan is currently trading at 6.54 per Dollar in onshore market.