Yuan gains for a second day while pound sees U-turn after Brexit fears ease on UK lawmaker’s death

Chinese yuan continued to strengthen for a second day on Friday as the British pound bounced back after the murder of a UK lawmaker shifted sentiment in the Brexit debate over whether Britain will vote to leave the EU next Thursday.

Onshore yuan traded at 6.5782 per US dollar in early trade on Friday, stronger by 0.18 per cent from the Thursday close before softening to 6.5862 per US dollar at 12.40am. This marked the second day the currency rose after it had hit a five-year low on Wednesday morning of 6.6043.

On a weekly basis, the onshore yuan fell 0.41 per cent against the US dollar, its biggest weekly decline in a month.

The People’s Bank of China set the reference point at 6.5795 per US dollar on Friday, weaker by 0.09 per cent from Thursday. The central bank on Wednesday had set the midprice low at 6.6001, which had been the weakest level in five years.

China’s yuan is not yet fully convertible, but each day the PBOC sets a midprice for the currency against the US dollar. Traders are allowed to trade within 2 per cent either side of the reference point during the day. Offshore yuan traded at 6.5946 per US dollar at 12.40am, stronger by 0.02 per cent from Thursday.

Stephen Innes, senior trader at Oanda Asia Pacific, said the yuan has been relatively stable withBrexit still the primary market focus, adding that there has been an abrupt U-turn in pound trading on the shift in Brexit sentiment.