Chinese yuan strengthens against US dollar after record-low levels last week
The Chinese central bank set the currency’s reference point against the dollar at 6.9042 Monday, up 0.18 per cent from last week
China’s currency strengthened against the US dollar on Monday morning, after the central bank set the reference point to an eight and a half year low at the end of last week.
Onshore yuan in Shanghai traded at 6.9012 to the dollar at 10.45 am, 0.04 per cent or 0.003 points higher than the 6.9042 close last Friday. The slight gain still puts the yuan at levels not seen since mid-2008.
Offshore yuan in Hong Kong traded at 6.9254 to the dollar at 10.45 am, 0.06 per cent, or 37 points, higher than the close on Friday.
The People’s Bank of China (PBOC) on Friday set the yuan reference point against the US dollar at 6.9042, 0.0126 points or 0.18 per cent up from Friday.
Traders are allowed to trade up to 2 per cent either side of the reference point for the day.
The renminbi has fallen over 6 per cent against the dollar this year, dropping around 2 per cent since the unexpected victory of Donald Trump in the US election.
In light of the weakening yuan, China’s central bank has warned commercial banks in Shanghai to avoid allowing money to flow out within the Shanghai Free Trade Zone (FTZ), Reuters reported on Friday.
But a central bank vice governor sought to temper concerns on Sunday, saying current conditions show the yuan will stabilise against the dollar.
“[China’s] international balance of payments are basically stable, the merchandise trade surplus remains relatively large, and the Chinese yuan has the conditions to remain basically stable within a reasonable range in the future,” PBOC vice governor Yi Gang was quoted as saying on state television. “As China’s economy recovers and institutional reform improves the business environment, the money that has left will come back.”
The yuan has weakened in response to reinforced expectations of an interest rate hike by the US Federal Reserve at their December meeting.
But while the US dollar has rallied since Trump won the election, analysts say it may have peaked, which could signal good news for the yuan.
“There are questions on whether Trump can fulfil his campaign promises and the long-term effect of larger fiscal spending,” Zhang Ming, senior researcher at the Chinese Academy of Social Sciences’ institute of world economics and politics, wrote.
In other currencies, the Japanese yen strengthened against the greenback on Monday morning, after seeing its fastest three-week climb since 1995 last week.
The South Korean won and Malaysian ringgit also jumped against the US dollar in early trading.