China's central bank Friday guided the yuan higher against the dollar by the fastest pace this year, leaving some analysts puzzled by the size of the move.
The People's Bank of China (PBOC) set the mid-point of the trading band at 6.4905, its strongest level so far this year. The pace of the increase versus the previous day's fix was the fastest since November last year.
Friday's fix compares with the onshore spot trade close of 6.5075 Thursday. China's central bank lets the yuan spot rate rise or fall a maximum of 2 percent against the dollar relative to the official fixing rate.
Policymakers on the mainland now generally consider the yuan's level against a basket of the currencies of China's trading partners, although it still publishes the daily fixing against the dollar.
That means the dollar's sharp overnight decline against the euro should have strengthened the yuan, but some analysts said the move was larger than can be explained by those fluctuations.
"The scale of the move doesn't really fit anyone's models. You can try to line it up with the trade weighted index or any other benchmark over the past 24 hours and you just can't come up with the number that we saw today," Sean Callow, senior currency strategist at Westpac Bank, told CNBC's Street Signs.
"You can only assume that it's another example of trying to wrong foot speculators," he said. Several high-profile investors, including storied hedge-fund manager Kyle Bass, have taken strong positions on expectations the Chinese currency would depreciate.
Analysts also noted that while the magnitude of the fix was surprising, the direction of the yuan was consistent with moves in other currencies that comprise the PBOC's basket that have gained against the dollar, including the euro.
Khoon Goh, senior foreign-exchange strategist at ANZ, said in a phone interview that while the yuan was fixed stronger than he expected, "it's a reflection authorities are quite comfortable allowing the renminbi to strengthen against the U.S. dollar as long as it retains relativity against the other currencies in the basket."
Some analysts said the fixing was set in line with their expectations.
Patrick Bennett, a foreign exchange strategist at CIBC, said the fixing matched his expectations, pointing to the euro's 1.5 percent climb against the dollar Thursday, as well as the yen's appreciation.
The shot higher despite the European Central Bank (ECB) announcing a fresh round of stimulus measures as the market appeared disappointed by ECB President Mario Draghi's suggestion that further interest rate cuts were unlikely.
"The argument there is there is probably no significant monetary policy divergence to price in," Nizam Idris, head of strategy, fixed income and currencies at Macquarie, said in a phone interview. "The ECB is stuck and the market is not expecting any rate hikes from [the U.S. Federal Reserve], at least this year."
That means the U.S. dollar is set to weaken against most Asian currencies, not just the yuan, Idris said.
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—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1