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China's yuan opened slightly weaker on Thursday but the gap between the guidance rate and the traded rate closed sharply as the central bank tried to slow a sharp selloff that saw the currency lose around 4 per cent in just two days.
The People's Bank of China set the midpoint rate at 6.4010 per dollar prior to market open, weaker than the previous fix of 6.3306.
The spot market opened at 6.3880 per dollar and was changing hands at 6.4288 at midday, 418 pips weaker than the previous day's close and only 0.43 per cent away from the midpoint, the closest it has traded to the guidance rate since November 2014.
The spot rate is currently allowed to trade with a range of 2 per cent above or below the official fixing on any given day, and previously had been consistently trading over 1 per cent weaker than the midpoint since March.
The offshore yuan was trading -1.02 per cent away from the onshore spot at 6.4764 per dollar.
China's decision to devalue the currency on Tuesday sparked fears of a global "currency war" and accusations that Beijing was unfairly supporting its exporters, but the central bank on Wednesday sought to reassure jittery global financial markets that it was not embarking on a steady depreciation.
However, sources involved in the Chinese policy-making process said powerful voices within government were pushing for the yuan to go still lower, suggesting pressure for an overall devaluation of almost 10 per cent.
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