Yuan climbs through 6.85 level as Trump fails to detail his US economic stimulus plans

PUBLISHED : Thursday, 12 January, 2017, 5:45pm
UPDATED : Thursday, 12 January, 2017, 5:45pm

China’s yuan traded stronger on Thursday after Donald Trump’s first official media conference since winning the presidential election weakened the US dollar.

Offshore yuan in Hong Kong rallied to 6.8445 on Thursday afternoon, breaking through the psychologically important level of 6.85, and reaching a high for the week so far. It retreated slightly after the surge, trading at 6.8640, up 0.35 per cent or 242 points, as of 5.15 pm.

Onshore yuan in Shanghai also strengthened, climbing 0.54 per cent or 372 points to 6.8977. It too hit a weekly high of 6.8917 in the afternoon trading session.

The People’s Bank of China on Thursday set the yuan reference point against the US dollar at 6.9141, 94 basis points or 0.085 per cent stronger than the previous day.

Traders are allowed to trade up to 2 per cent either side of the reference point for the day.

During his news conference on Wednesday, Trump discussed his plans to keep manufacturing jobs in the US and said that companies shifting jobs abroad will have to pay a border tax.

There was no provocative rhetoric aimed at China, but commentators said he failed to provide any specific guidance on how to stimulate the US economy, which pushed the dollar down 0.67 per cent to 101.1.

Guan Tao, a former departmental head of the State Administration of Foreign Exchange, said in Shanghai that he expects the movement of the US dollar to be unpredictable under Trump’s presidency.

The yuan will come under some pressure to maintain stability if the US dollar continues to strengthen this year, Guan added.

Linus Yip, an analyst at First Shanghai Securities, said the next US rate rise may come in the middle of this year, which would produce a stronger dollar. “At that time, the Chinese yuan is highly likely to break the important 7 level,” Yip added.

In other currency trading, the British pound strengthened for a third consecutive day, up 0.09 per cent at US$1.222 on Thursday afternoon, while the Japanese yen climbed for a fourth straight day, trading 0.72 per cent higher at 114.57 against the dollar.