Yuan strengthens for third day, recovering from eight-year low

China’s central bank set the yuan’s reference point against the US dollar to 6.8865, stronger by 0.03 per cent

PUBLISHED : Wednesday, 30 November, 2016, 11:05am
UPDATED : Wednesday, 30 November, 2016, 11:05am

China’s currency strengthened against the US dollar on Wednesday for the third day in a row, after plunging to levels not seen since June 2008 last Friday.

Onshore yuan in Shanghai traded at 6.8837 to the dollar at 10.15 am, 0.14 per cent or 0.0096 points stronger than Tuesday’s close.

Offshore yuan in Hong Kong traded at 6.9145 at 10.15 am, up 0.20 per cent or 0.0135 points.

The People’s Bank of China (PBOC) on Wednesday set the yuan reference point against the greenback at 6.8889, 24 basis points or 0.03 per cent stronger than on Tuesday.

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

The renminbi has seen volatile movements against the dollar since the election of Donald Trump as US president and the anticipated interest rate increase by the Federal Reserve.

China has tightened its controls on capital outflows as jittery investors look to move their money out of the country.

“The acceleration of yuan weakness of late has spooked the PBOC,” Stephen Innes, senior trader at Canadian foreign exchange company OANDA, said in a morning note. “Mainland Chinese appetite for all things US dollars has accelerated as the population seeks out creative measures to get their money out of China and into the USD.”

The US dollar initially rose on higher-than-expected gross domestic product (GDP) data in the third quarter, but pulled back slightly.

The dollar index last fell 0.05 per cent to close at 100.94.

While the greenback has rallied on the expected December interest rate hike and enjoyed a post-election bull run from the stimulative economic policies expected under Trump’s presidency, its strength is fading, according to Walker England, trading instructor for foreign exchange news site DailyFX.

Meanwhile, the Japanese yen rose against the dollar to 112.252 yen, following a second straight month of strong industrial production data.