Yuan pulls back from eight-week high after recent gains
The Chinese yuan pulled back on Wednesday morning, after closing at an eight-week high in the previous session, despite the central bank guiding the currency higher for a third consecutive session.
On Wednesday, the People’s Bank of China raised the yuan’ daily reference rate by 249 basis points to 6.6050 against the US dollar, the strongest level since 24 June, compared with the previous fixing rate of 6.6305. The Chinese central bank has strengthened the yuan’s fixing for a third day in a row.
The onshore yuan, which trades in Shanghai, softened to 6.6305 per US dollar on Wednesday morning. In the previous day, the onshore rate closed at an eight-week high of 6.6267.
The offshore yuan trading in Hong Kong also dropped 0.1 per cent to 6.6353 against the US dollar.
Analysts said the yuan’s recent strength was against a backdrop of weaker dollar.
“The yuan is continuing to trade off the back of broader US dollar weakness and traders are still taking cues from G10 movements,” said Stephen Innes, senior trader at OANDA Asia Pacific.
In addition, “Shenzhen-Hong Kong connect euphoria, the prospect of more stimulus from the PBOC and relative calm in the RMB complex is providing smooth reassurance to investors in their search for emerging market yield,” said Innes.
On Tuesday night, the US dollar index, a gauge of the strength of the greenback, dropped to a two-month low. The index had briefly gained around the start of trading, after New York Fed president William Dudley said an interest rate increase in September could be possible.
Premier Li Keqiang said on Tuesday that the State Council has already approved the Shenzhen-Hong Kong Stock Connect. The scheme is expected to be operational within four months, said HKEX chief executive Charles Li Xiaojia.