China's yuan touched its weakest level in nearly eight weeks on Wednesday, and traders said forceful central bank intervention has restored dollar demand to the market and broken a long deadlock that had decimated trading volumes. "Things won't go back to the way they were. The whole market knows that the central bank has bought a lot (of dollars)," said a trader at a commercial bank in Shanghai.

Spot yuan closed at 6.2518 versus the dollar on Wednesday, softer than its 6.2460 close on Tuesday. Volume was strong at $15.1 billion. The People's Bank of China (PBOC) has intervened sporadically in recent weeks when it appeared trading would otherwise grind to a halt.

It launched another such intervention on Monday, buying dollars aggressively amid an absence of other dollar bidders. That caused spot yuan to touch an seven-week intraday low on Tuesday and sink further Wednesday to touch its lowest level since October 19. The PBOC set its midpoint at 6.2883 on Wednesday, mildly stronger than Tuesday's fix of 6.2906. That implied a top-end limit of 6.2254. The bank allows the exchange rate to rise or fall by no more than 1 percent from the midpoint it sets each morning.

Copyright Reuters, 2012