Chinese yuan reversed earlier losses and managed to strengthen late on Wednesday despite the central bank weakening the reference rate. Offshore yuan traded in Hong Kong was quoted at 6.9304 per US dollar in the evening session, 0.11 per cent stronger than the previous day, after hitting a low of 6.9480 in the morning. Onshore yuan in Shanghai traded at 6.9490 against the US dollar, 0.03 per cent stronger than a day earlier. The People’s Bank of China on Wednesday set the yuan reference point against the US dollar at 6.9489, 21 basis points or 0.03 per cent weaker than the previous day. Traders are allowed to trade up to 2 per cent either side of the reference point. The yuan has shown some stability so far this week after sharp depreciation late last week following the US Federal Reserve’s decision to raise its key interest rates and its hawkish statement pointing to more than the expected number of interest rate rises in 2017. “Dollar appreciation expectations have further risen since the Fed’s rate hike, leading to heightened capital outflow pressure,” said Yu Xianrong, an analyst at CICC. The US dollar index, a gauge of the strength of the greenback, is fluctuating around a 14-month high of 103, after surging over 2 per cent after the Fed rate decision. “An extrapolation based on last month’s net forex outflows suggests that forex reserves could fall below US$3 trillion this month,” said Yu. However, Yu said it is possible that China’s central bank might borrow dollars to keep the headline level above the US$3 trillion level this month, given the sensitivity of the timing of recent bond market turmoil and concerns about the depreciation of the yuan.