(Repeats item first carried late on Thursday)
* China state banks suspected of intervening
* Offshore yuan set for record daily gain
* Seen as bold gesture by Chinese authorities
* Beijing wants to dampen expectations for yuan fall
By Michelle Chen and Saikat Chatterjee
HONG KONG, Sept 10 (Reuters) - China's yuan shot higher in offshore markets on Thursday on suspected rare intervention by Chinese state banks that was seen as a bold gesture by authorities to shake out speculators betting against the currency.
The intervention caught the market wrong-footed and catapulted the yuan more than 1 percent higher, putting the offshore rate on track for its biggest daily gain on record.
Investors have been positioning for yuan depreciation since a shock devaluation of the currency in August, which sparked fears the economy was slowing down more than expected. Those bets are easier to place in offshore markets, where Chinese authorities have less influence.
"The big picture is that policy makers are doing everything they can do to dampen expectations that the yuan will depreciate much," said Mark Williams, an economist at Capital Economics in London.
"There's been rumours before of state entities acting on behalf of the central bank offshore. It shows that policymakers are unwilling to relax control of key variables that now include the offshore currency."
The PBOC did not respond to calls requesting comment.
MARKET ACTION
Since the devaluation, China has scrambled to keep the yuan steady, running down its foreign exchange reserves by a record amount in August to stabilise the onshore rate.
Wednesday's rise in the offshore yuan was the clearest indication to date that China will also try to stop speculation against its currency outside of the mainland.
The offshore yuan spot rate strengthened more than 1 percent to 6.39 per dollar from 6.4698 earlier in the day. It marked the offshore rate's highest level since the devaluation.
Offshore traded volumes spiked as much as 10 times their monthly average, Thomson Reuters data showed.
As a result of the intervention, the long-standing spread between the onshore and offshore rates narrowed sharply, while dollar currency forwards dropped.
The offshore yuan discount to the onshore yuan spot market narrowed to 0.47 percent from 1.56 percent on Wednesday.
The wide gap had implied that offshore markets were pricing in further depreciation in the currency, an expectation China has been trying to suppress.
"In the very extreme moment of the buying, we saw a rare reverse market quote in the Chinese currency, which is an indicator that the buyers wanted to push up the value of the yuan at any cost," said the head of local currency trading at a U.S. bank in Hong Kong.