Chinese steel futures climbed more than 2 percent on Thursday as investors returned to the market after a two-day selldown, many of them continuing to hedge their risk against a sliding currency.

Fears of a liquidity squeeze fueled a selloff in China’s commodity futures on Wednesday, deepening losses in steel and iron ore which only on Monday had rallied sharply amid a fresh wave of speculative funds.

“Given the increasing uncertainty from the macroeconomic point of view, there might be some risk for the yuan to continue to depreciate and commodities may be good assets to hedge that risk,” said Richard Lu, analyst at CRU consultancy in Beijing.

The most-traded rebar on the Shanghai Futures Exchange was up 2.3 percent at 3,111 yuan ($451.24) a tonne by 0318 GMT. The construction steel product lost nearly 7 percent in the past two days based on settlement prices.

As the yuan fell to its weakest in more than eight years, China’s central bank has circulated new rules for companies which make yuan-denominated loans to overseas entities in its latest bid to control capital outflows.

While China’s factory activity expanded modestly in November, a central bank adviser said the economy faces growth risks next year from an expected slowdown in the property market.

The recovery in steel futures pulled back prices of raw material iron ore. The most-active iron ore on the Dalian Commodity Exchange rose 1.4 percent to 574 yuan a tonne, after sliding 8 percent in the past two sessions.

That could help improve bids in the physical iron ore market, although traders say buyers were largely hesitant given the recent wild swings in prices.

Iron ore for delivery to China’s Qingdao port dropped 6.8 percent to $72.08 a tonne on Wednesday, according to Metal Bulletin. The spot benchmark has lost almost 11 percent since touching a two-year high above $80 on Monday.

Source: Reuters (Reporting by Manolo Serapio Jr.; Editing by Joseph Radford)