(Bloomberg) -- China is escalating its defense of the yuan, pushing up funding costs in the offshore market to squeeze short positions and setting a new record with its stronger-than-expected reference rate for the currency.Most Read from BloombergBorrowers With $39 Billion in Student Loans Finally See ReliefMusk Told Pentagon He Spoke to Putin Directly, New Yorker SaysQuant Trader Doubles Fortune to $11 Billion as XTX Profit SurgesS&P Joins Moody’s in Cutting US Banks Amid ‘Tough’ ClimateAnalys
Analysts say the steps are designed to slow the pace of yuan depreciation rather than engineer a sustained rally. Forecasters at JPMorgan Chase & Co., Nomura Holdings Inc. and UBS Wealth Management all predict further weakness in the currency this year. The offshore yuan edged lower Tuesday, dropping back toward its 2023 low set last week.
The record positive bias for the fixing came a day after yuan one-month forward points, a measure of the cost to borrow the currency versus the dollar, jumped the most in offshore trading since 2017. Funding costs have climbed in recent days as local banks have refrained from providing more of the currency in the swap market, according to traders. Higher funding costs make it more expensive for speculators to bet against the yuan.
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