China’s yuan gains ground against dollar, reversing three-day decline
The Chinese yuan reversed a three-day decline to trade stronger on Monday, as the US dollar edged down on profit-taking after hitting a 14-year high.
The onshore yuan in Shanghai strengthened 129 basis points, or 0.19 per cent to 6.9445 as of 1:30pm, while the offshore yuan traded in Hong Kong also strengthened 0.31 per cent or 215 basis points at 6.9408.
The People’s Bank of China set the yuan’s reference rate firmer by 196 basis points or 0.28 per cent to 6.9312 per US dollar on Monday. Traders are allowed to trade 2 per cent either side of the reference rate.
The US dollar index, which tracks the dollar against a basket of six major counterparts, retreated 0.28 per cent at 102.66. Last week it climbed to 103.56, its highest level since 2002, when the US Federal Reserve raised the interest rate by a quarter-point and indicated a more hawkish stance towards future rate hikes than expected.
Last week, the Chinese yuan was testing the important level of 7 per dollar, with the onshore yuan softening to an eight-year low at 6.9592, while the offshore was at a modern record low of 6.9688.
Ministry of Commerce researcher Jin Bosong said on Monday that next year the yuan will depreciate 3 to 5 per cent against the dollar.
“In 2016, the yuan depreciated when the US dollar was strong, but stabilized when dollar was weak,” said Larry Hu, an analyst at Macquarie Capital. “Such one-way depreciation has led to rising depreciation expectations, resulting in huge capital outflows pressure.”