CHINA’S yuan made its biggest one-day gain against the U.S. dollar in more than 10 years in onshore markets Friday as the central bank appears to be boosting the currency before the International Monetary Fund’s meeting next month.

    The dollar fell 0.6 percent on the day to hit 6.3171 yuan just before the market closed. That would not be an especially eye-catching move for other emerging market currencies but for the yuan, still tightly controlled by China’s central bank, it was the biggest daily gain since its one-off revaluation in July 2005.

    HSBC currency strategist Dominic Bunning in London, the biggest hub for yuan trading outside Asia, said the steps China was taking to liberalize the yuan, also called the renminbi, meant moves of this scale would become more common.

    “We’re going to have to be more prepared for seeing days when the renminbi does trade in this manner,” he said. “Daily ranges are going to get bigger and the currency is going to move in a more volatile manner.”

    The People’s Bank of China (PBOC) was suspected of intervening in trading to support the yuan in the offshore market Thursday evening, pushing it up sharply, catching some traders by surprise and forcing them into stop-loss orders Friday, traders said.

    “We still saw some intervention by [China’s] State-owned banks today, plus a bout of stop-loss trades appearing when the CNH [offshore yuan] firmed to around 6.34 and then kept appreciating,” said an offshore trader at an Asian bank in Hong Kong.

    Some traders linked the support for the yuan to the IMF’s forthcoming internal debate on whether to include the yuan in the special drawing rights (SDR) basket.

    “The PBOC intervention today appeared to be stronger than usual,” said a trader at a European bank in Shanghai.

    “It appears the central bank may want the yuan to shows more strength ahead of the IMF’s discussion on whether to include the yuan into the SDR basket.”

    The offshore yuan, which trades more freely than its onshore counterpart and can be bought and sold 24 hours a day, also gained in much higher than average volume, though not by as much. (SD-Agencies)