China’s yuan at strongest level since August devaluation
China’s onshore yuan traded at its strongest level in nearly two months yesterday, as traders’ appetite were bolstered by signs of slowing capital outflows and rising usage of the yuan in payments worldwide.
The onshore spot rate rose 0.12 per cent, or 78 basis points to stand at 6.3456 per US dollar, the highest level seen since August 12, a day after the surprise 2 per cent devaluation.
The People’s Bank of China on Friday set the daily fixing rate at 6.3493 per US dollar, up 12 basis points from the previous daily fixing. It was the highest level in more than seven weeks. “In the short term, the downward spiral of the yuan has been more or less arrested by a raft of measures taken by the central bank,” said Guan Qingyou, a strategist with Minsheng Securities. “Looking forward, we will see the yuan rate supported by China’s abundant currency account surplus and a bigger role the currency is playing in global transaction settlements.”
China’s foreign exchange reserves fell by US$43.3 billion in September to US$3.51 trillion, declining for a fifth straight, according to People's Bank of China data released Wednesday.
China’s top leaders have also on multiple occasions played down fears of further depreciation.
China’s currency snatched the world’s No 4 spot in global payments, overtaking the Japanese yen with a 2.79 per cent share in August, up from a 0.84 per cent share three years earlier, according to data released by Swift on Tuesday.
Beijing’s bid to have the yuan recognised as a global reverse currency has recently obtained impetus from the White House, which said it supported the inclusion of the yuan in the Special Drawing Rights basket provided it fulfil the criteria set out by the International Monetary Fund.
Meanwhile, official data showed the rate of decline in the country’s foreign exchange reserves in September eased.
But some analysts say that a bumpy road lay ahead for the yuan with more downward pressures posed by likely weak economic data.
“Although the PBOC has been leaning against yuan depreciation pressures recently, this should prove temporary,” said Ju Wang, a senior Asian foreign exchange strategist with HSBC. “We see a gradual yuan weakness and forecast the onshore yuan rate to reach 6.50 by the end of 2015.”