Some analysts suggest the stronger fixing is due to the "counter-cyclical factor" , a tweak to the formula for setting the trading band to give authorities more latitude.The yuan is not a fully-convertible currency and its onshore exchange rate is a managed floating rate. Spot dollar/yuan is allowed to trade 2% either side of a fixed midpoint each day.
The banks refer to the onshore yuan closing price from the previous day, overnight dollar movements or shifts in baskets such as the CFETS renminbi indextold Reuters that the banks were asked to apply the "counter-cyclical factor" to their calculations, and tweak their submissions to CFETS accordingly.First introduced in 2017, regulators said the CCF was an effort to better reflect supply and demand, and guide market participants to focus more on macroeconomic fundamentals.
It allows market-makers to discount the closing price, where it's deemed out of step with their expectations.It appears at times of yuan weakness. The CCF was abandoned in 2020 when the yuan rose sharply and authorities decided to let market forces play more of a role.