Yuan jumps on sign of China central bank intervetion

The yuan jumped in early trade on Friday, hitting a record high against the dollar, as traders reported large amounts of dollar offers from major Chinsee state-owned banks, in a sign that the central bank is intervening to support the currency.

The People’s Bank of China has been setting a slew of high dollar/yuan mid-points over the past few weeks to deter speculation on yuan depreciation.“This is a clear intervention by the government to support the yuan and is in line with the PBOC’s recent moves to use the mid-point to prevent the yuan’s fall,” said a trader at a European bank in Shanghai.

“The move indicates that the government is determined to maintain the stability of the yuan’s value in the near term, possibly even let it appreciate slightly.”

Some offshore investors are shorting the yuan on concerns over the Chinese economy amid global weakness caused mainly by the euro zone debt crisis.

After initial jump to the record high of 6.3294, the yuan pulled back slightly, and was trading around 6.35 versus the dollar, still up sharply from Thursday’s close of 6.3735.

Several traders said the PBOC might let the yuan continue appreciating in a measured way for the rest of this year, possibly allowing the currency to hit around 6.30 against the dollar by the end-December.

The yuan is not freely convertible under the capital account and the PBOC uses the mid-point, or the reference rate from which the yuan can fall or rise 0.5 percent in a day, to control the exchange rate..(Reporting by Lu Jianxina and Kazunori Takata).

SHANGHAI, Dec 16 (Reuters) -