(Bloomberg) -- China extended its fight against the yuan’s weakness with a stronger-than-expected currency fixing for the sixth straight day. 

The People’s Bank of China set its daily reference rate for the yuan at 6.8906 per dollar, 177 pips stronger than the average forecast in a Bloomberg survey of analysts and traders. That’s after the PBOC set the yuan fixing at at 249 pips higher than estimated on Tuesday, marking the second strongest bias on record since the survey was initiated in 2018.

Moreover, at least one big state-owned bank was dumping dollars before the official onshore yuan market close at 4:30 p.m. Beijing time Tuesday, according to four traders who asked not to be identified because they aren’t authorized to speak publicly. Still, the yuan has remained under downward pressure, inching closer to the key 7 per dollar level, last seen in July 2020.

“We expect the Chinese central bank to continue to keep the yuan exchange rate basically stable,” ahead of a reshuffle of the country’s ruling party in October, said Gao Qi, foreign exchange strategist at Scotiabank in Singapore.   

Goldman Sachs Group Inc. last week joined the ranks of yuan bears predicting China’s currency will weaken to 7 in the next three months as the nation’s economy slows. The yuan’s slide that started with an unexpected PBOC rate cut this month was exacerbated by a hawkish Federal Reserve as it threatened to further widen the monetary policy gap between US and China. 

China’s factory activity contracted in August for a second straight month, with the economy taking a hit from power shortages spurred by a historic drought, on top of a property market crisis and Covid outbreaks. Covid-hit tourism season is also dealing a fresh blow to the recovery. 

The offshore yuan gained 0.2% to 6.9109 per dollar at 10:45 a.m. local time. The onshore yuan was up 0.1%.

(Adds analyst’s comment in the fourth paragraph, PMI data in the sixth paragrah, yuan level in the last)

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