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Pedestrians pass buildings in Beijing, China, on Friday, March 4, 2022. China will likely announce its lowest economic growth target in more than three decades when top leaders gather Saturday for a key political meeting, putting pressure on the government to step up fiscal stimulus to spur demand and jobs. Photographer: Qilai Shen/Bloomberg , Bloomberg

(Bloomberg) -- An organization formed by China’s biggest foreign-exchange traders asked banks to trade the currency at levels closer to the central bank’s fixing at the market open, according to people familiar with the matter.

Lenders that submit the daily fixing to Beijing should trade the yuan around the reference level in the first few minutes after the market opens onshore, the self-regulatory group for the foreign exchange market told the banks this week, according to traders from institutions that received these instructions, who declined to be identified as the information is private. The self-regulatory group didn’t immediately respond to an email sent by Bloomberg requesting a comment.

The directive came as the onshore yuan dropped to near the weak end of its 2% allowed trading band around the fixing rate of late, the people said. On Wednesday, the People’s Bank of China issued a strongly-worded statement to deter currency speculators.

Since Wednesday, at least one bank quoting the fixing to the PBOC traded the yuan near the fix briefly after the market opened, according to FX traders who asked not to be identified because they aren’t authorized to speak publicly. The onshore yuan was 190 pips stronger than the fixing in Friday afternoon from being more than 1,000 pips weaker than the reference rate on Monday.

The PBOC sets a reference rate each trading day at 9:15 a.m. Beijing time. According to the current self-disciplinary guidelines that have been in place since 2016, official quoting banks should guide the exchange rate by trading the yuan near the reference rate in the first 15 minutes after the market opens at 9:30 a.m. However, up to now the rule wasn’t strictly enforced.

The onshore yuan strengthened Friday as the dollar paused its advance. Still, the Chinese currency is on track for a seventh month of losses, matching a record run of monthly declines set during the height of the US-China trade war four years ago. China’s onshore foreign-exchange markets will be closed for a week due to the Golden Week holiday.

The PBOC set the fixing at a stronger-than-expected level for the 27th day, the longest run of stronger fixings on record since Bloomberg started the survey in 2018. Earlier this week, the PBOC imposed a risk reserve requirement of 20% on currency forward sales by banks to make it more expensive to short the yuan. That’s after a move to reduce the foreign-currency reserve requirements for bank deposits.

The China FX Market Self-Regulatory Framework, which was founded in 2016, is responsible for the management of banks’ quotations of the yuan fixing, interbank currency trading and some cross-border yuan businesses, according to its website.