China's PBoC sets weaker fix for yuan, surprises some investors

China's central bank surprised some in the markets on Wednesday by setting a lower fix for the country's currency against the US dollar.

The People's Bank of China set the mid-point for the so-called 'onshore' yuan at 6.5314 per dollar - its lowest since 2011 - 0.22% below the previous day's level.

In reaction to that, the freely-traded off-shore yuan dropped to 6.6915 versus the greenback, its weakest level going back to the last quarter of 2010, resulting in a record spread between the on-shore and off-shore exchange rates.

Wednesday's decision appeared to spark worries that a depreciating yuan might feed into selling in other asset classes, despite widespread expectations from analysts for further weakness in the country's currency in 2016, especially versus the dollar.

Nonetheless, there was speculation China might have intervened in FX markets on Tuesday in a bid to soothe market jitters after the stockmarket rout the previous day - which led regulators to extend a ban on the selling of shares by major shareholders in companies beyond 8 January.

State-owned funds also stepped in to purchase stocks as the central bank injected the most cash into the financial system since last September.

The Shanghai Stock Exchange's Composite Index closed 2.25% higher on Wednesday at 3,361.84.