Yuan heads for key level against dollar
A breach of 6 yuan barrier is seen as coinciding with upcoming rounds of Sino-US talks amid expectations of a widening of the trading band
The yuan could breach another key psychological level this year to trade at 6 to the US dollar as the mainland authorities seem inclined to ease the reins on the currency further.
Spot yuan closed yesterday at 6.1287 per dollar in Shanghai. It has been hitting 19-year highs frequently in the past few months and has strengthened about 1.7 per cent against the dollar since April.
That has already surpassed the 1.03 per cent appreciation for the whole of last year, as capital unleashed by quantitative easing in developed countries flooded into China betting on robust economic growth and greater financial reforms.
Notably, the yuan's rally continues unabated even after mainland officials and economists earlier this year said the currency had reached its equilibrium.
"There has been a policy to drive down dollar-yuan fixing since the end of March and this will continue through both the June 7-8 US-China meetings and the July 8-12 Sino-US Strategic and Economic Dialogue," Nomura Securities economists Craig Chan and Teo Wee Choon wrote in a research note.
They expect the yuan fix to strengthen to 6.13 by the Sino-US dialogue date, based on Beijing's increasing tolerance for yuan appreciation.