China's yuan currency slipped despite the efforts of the authorities on Thursday, as the gloom in global markets obscured signs that China's economy may not be weakening as fast as some investors had feared.
After a fragile morning, the country's stock markets finished strongly, though they remain sharply down for the year and just a few percentage points above their lowest ebb during last summer's crash, a level some say Beijing would pull out the stops to defend.
The turbulent start to 2016, with the currency and stock markets tumbling, had stoked concerns that Beijing was losing its grip on economic policy, just as the country looks set to post its slowest growth in 25 years.
China's central bank set a firmer mid-point rate for the yuan, signaling determination to hold the line against expectations of a sustained depreciation of a currency that has lost 5 percent of its value against the dollar since August.
The yuan, nonetheless, weakened during the day.
"The onshore yuan weakened in early trade, taking cues from the offshore yuan. The offshore was down probably because liquidity improved," said a dealer at a foreign bank in Shanghai who also noted strong dollar demand.
Traders said offshore liquidity was squeezed earlier in the week as a result of state-backed banks buying, at the central bank's behest, to push overnight borrowing rates in Hong Kong to record highs, making it prohibitively expensive to bet against the yuan.
The People's Bank of China set the midpoint rate for the tightly managed currency at 6.5616 per dollar on Thursday, firmer than both the previous fix of 6.563 and Wednesday's closing quote 6.5743.
The spot market was changing hands at 6.5884 in the afternoon, 141 pips weaker than the previous close. The spot rate is allowed to deviate 2 percent either side of the daily fix.
The liquidity squeeze in the offshore market has narrowed the gap with the onshore market, and on Thursday the offshore yuan was trading 0.2 percent below the onshore spot at 6.6014 per dollar.
Asian share markets weakened across the board on Thursday, hit by steep losses on Wall Street overnight as a rout in oil prices heightened worries about the global economy.
China's main stock indexes, however, reversed direction in the afternoon session, pulling the Shanghai Composite Index back over the 3,000 mark to end up 2 percent, while the CSI300 index closed up 2.1 percent.
The indexes have lost 14-15 percent so far in 2016 and are not far from their 2015 lows, chalked up during August after losing more than 40 percent from early June.
The August low might have been lower still, had regulators not wheeled out a raft of measures to support the market, and some think the 'National Team' would do the same again to stop the indexes breaching those levels.
"SSEC's 2,850 low is a level worth defending for the National Team, and a level where investors should bet for a decent rebound," said Samuel Chien, a partner of Shanghai-based hedge fund manager BoomTrend Investment Management Co.
Chien said some stocks could see a rebound of as much as 50 percent, though whether the support would hold for the medium term was questionable and depended on the economic situation.
Zhou Lin, analyst at Huaitai Securities, said it was just a matter of time before the indexes fell below the milestone.
"The yuan is depreciating, the U.S. is raising rates, and the economy is deteriorating. You need real money to support the market, not just rhetoric," he said.
Weekly data from the Shanghai Stock Exchange shows money shifting into exchange traded funds (ETFs) tracking bonds, gold and money markets at the start of January.
The Shanghai and Shenzhen stock exchanges said late on Wednesday that they have stepped up monitoring to ensure listed companies' major shareholders are abiding by new rules designed to restrict their sales and prevent a build-up of pressure that might lead to another crash.
On Wednesday, China's share markets had appeared to take no comfort from December trade data that beat forecasts and tempered some of the fears about the slowdown in the world's second-largest economy.
After the market closed on Thursday the Commerce Ministry released another snippet of upbeat data, showing that foreign direct investment into China had risen last year despite slowing growth.
(Reporting by Nathaniel Taplin and Samuel Shen; Additional reporting by Wing Wu; Writing by Will Waterman; Editing by Simon Cameron-Moore and Alex Richardson)