SHANGHAI: China’s yuan rebounded versus the US dollar on Tuesday, ending two days of loss, after the central bank lifted its guidance the most in over six months in a move investors interpreted as an attempt to stabilise a market swayed by war in the Middle East. The US-Israel war against Iran spread with Israel retaliating against Hezbollah in Lebanon while Iran continued attacks on US interests in Gulf states. Prior to market open on Tuesday, the People’s Bank of China set its midpoint rate at 6.9088 a dollar, 148 pips or 0.21% firmer than its previous setting and the biggest one-day strengthening in percentage terms since August 25. The bank allows spot yuan to trade 2% either side of the midpoint each day. The midpoint is acting as a policy tool guiding market expectations, said chief financial market analyst Marco Sun at MUFG (China). “The yuan has already depreciated following the recent adjustment of the FX forward reserve requirement to zero, along with ongoing geopolitical noise, so the fixing will remain steady to anchor market expectations,” Sun said. The midpoint, however, was 272 pips weaker than a Reuters’ estimate of 6.8816. Both onshore and offshore yuan bounced after the guidance. Onshore yuan last fetched 6.8842 a dollar as of 0207 GMT, while its offshore counterpart traded at 6.8835. The central bank acted to rein in the fast-rising yuan last week by scrapping risk reserve requirements for some forward currency contracts, a move that would encourage dollar-buying as exporters feel the pinch from a stronger currency.