Offshore yuan touches 1-month high after central bank makes tweak to daily pricing
Meanwhile, Hong Kong acts to defend its currency for the fourth time this month.
Offshore yuan, traded outside the mainland, weakened Monday, giving up early morning gains when the currency jumped to its highest level in almost a month following an adjustment by the central bank in its daily fix formula.
Last Friday, China’s central bank signalled it will more proactively guide the market, as the country faces a stronger US dollar and an ongoing trade war.
The China Foreign Exchange Trade system (CFET), a unit of the People’s Bank of China, said it had reactivated a mechanism this month – known as the counter-cyclical factor – in its daily pricing of the yuan against the dollar to counter the bias toward a weaker yuan.
The PBOC raised the yuan reference rate on Monday by 0.29 per cent to 6.8508 per dollar, halting two days of weakening.
Meanwhile, Hong Kong’s de facto central bank on Monday stepped in the currency market to defend the city’s currency, buying HK$3.93 billion while selling US$500 million in Monday’s early evening trade. The move reflected continuing capital outflow pressure from the city. The Hong Kong Monetary Authority’s intervention, the fourth time this month, will result in a withdrawal of banking liquidity and reduces the city’s aggregate balance to HK$87 billion.