The yuan hovered near 16-month lows against the dollar on Monday, despite more support measures for the currency and as the greenback remained buoyant following strong U.S. jobs data.

The yuan is under renewed depreciation pressures, affected by a combination of a broadly stronger dollar, falling Chinese bond yields and escalating trade tensions with the U.S. and other economies.

On Monday, the People’s Bank of China (PBOC) announced that borrowing limits would be raised to allow companies to borrow more from abroad, a move considered supportive for the yuan.

Meanwhile, PBOC Governor Pan Gongsheng, speaking at the Asia Financial Forum in Hong Kong, said that “China has the confidence, conditions and ability to maintain stable operation of the foreign exchange market.”

“China will keep the yuan exchange rate basically stable at reasonable and balanced levels,” Pan reiterated.

As of 3.59 a.m GMT, onshore yuan was 0.01 per cent firmer at 7.3318 per dollar, but was 5 pips away from hitting the weaker end of the daily trading band set by the midpoint fixing. And it was not far from a 16-month low of 7.3328 hit on Friday.

Market reaction to the country’s December trade data earlier on Monday, where exports and imports surpassed expectations, in part buoyed by front-loading ahead of possible new tariffs, was muted.

Offshore yuan traded at 7.3582 yuan per dollar, up about 0.08 per cent in Asian trade. Earlier, the PBOC set the midpoint rate, around which the yuan is allowed to trade in a 2 per cent band, at 7.1885 per dollar, and 1,557 pips firmer than a Reuters’ estimate of 7.3442.

The central bank has been setting its official midpoint guidance on the firmer side of the key 7.2 level and stronger than market projections since mid-November. Traders and analysts widely interpret this as a sign of rising unease over recent yuan declines.

Based on Monday’s official guidance, the yuan is allowed to drop as far as 7.3323.

“Jawboning, capital tweaks, offshore yuan bills issuance have been utilised to prop up the yuan,” Maybank analysts said in a note. “Another sub-7.20 fix sends a message that the PBOC still wants to slow the pace of depreciation of the yuan and cap the USD/CNY around 7.33 for now.”

The PBOC said last week that it will sell 60 billion yuan worth of six-month yuan bills in Hong Kong on January 15, the most since the central bank started such bill sales in the financial hub in 2018.

“The outlook for the RMB is very tricky, both because of the domestic issues as well as the external risk,” said Joey Chew, head of Asia FX research at HSBC. She added that greater clarity about tariff risks facing China was needed.

“So overall, we are looking for upside in dollar-RMB, but the timing and the pace of all this could be a little bit more gradual than what we saw in say, 2018 or 2019.”

In global markets, the U.S. dollar began the week on a strong note, leaving its peers languishing near multi-year lows after a blowout U.S. jobs report that underlined the outperformance of the world’s largest economy versus the rest of the world.

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