(Bloomberg) -- It's hard to be a bull or bear in China when it comes to the currency.
At the start of this month, the yuan was surging so fast against the dollar that a gauge of buying momentum was the highest in 12 years. Analysts, stuck with their timidly bearish forecasts, could only watch as the currency soared past every year-end target. Then came the snapback on Sept. 8, sparked by the easing of curbs on shorting, and the currency has only gone in one direction since -- down.
The yuan fell 0.4 percent to 6.6821 per dollar at 10:21 a.m. in Shanghai, extending its loss this week to 1.4 percent, the most among Asian peers. Its relative strength was the weakest since Jan. 3. Bearish sentiment is rising even as the People's Bank of China fixed the daily reference rate at stronger levels than analysts expected -- a signal that recent declines are becoming too steep for comfort.
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The drama highlights the tussle between the state and traders. Since the PBOC devalued the yuan two years ago, policy makers have used fixing guidance, verbal jawboning, direct intervention and capital controls to limit big swings in the exchange rate. Despite that, volatility is surging, even before a crucial Communist Party gathering in October. At least traders know that next week there will be calm in the onshore currency -- China's financial markets are closed all week for holidays.
China's central bank, which typically doesn't comment on its activities in the currency market, didn't respond to faxed questions on Thursday.
To contact Bloomberg News staff for this story: Tian Chen in Beijing at tchen259@bloomberg.net.
To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Sarah McDonald
With assistance from Tian Chen
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