Chinese yuan continues to climb against USD

Source:Xinhua Published: 2017/8/30 13:46:18

The Chinese currency on Wednesday continued to climb against the US dollar on the back of a firming economy and a weaker dollar.

The central parity rate of the Chinese currency, the renminbi or the yuan, strengthened 191 basis points to 6.6102 against the US dollar Wednesday, according to the China Foreign Exchange Trade System.

The adjustment came after a rise of 60 basis points Tuesday, reaching the highest level since August last year.

The dollar saw sharp swings against major currencies on Tuesday, after slipping to a 15-month low against other major currencies in late trading Monday, as Federal Reserve Chair Janet Yellen did not mention monetary policy at a central bankers' summit, and the euro remained broadly supported.

The dollar index, which tracks the greenback's value against a basket of six major currencies, last stood at 92.337, having recovered from Tuesday's low of 91.621, its lowest level since January 2015.

Insiders said the yuan's rally was supported by the sound fundamental backdrop of the Chinese economy. China's economy expanded 6.9 percent in the first half, well above the target of around 6.5 percent for the year.

Reform of the "central parity system" also helped improve market expectations, they said.

More than two years after China changed its "central parity system" to let the market play a bigger role in exchange rate formation on Aug. 11, 2015, China's currency stands tall against the US dollar with stabilized market expectations.

Authorities have introduced a "counter-cyclical factor" to the existing pricing model of the yuan's central parity rate against the US dollar, aiming to moderate pro-cyclical fluctuations driven by irrational sentiment in the foreign exchange market.

The Chinese yuan will continue its momentum given a slew of positive economic indicators in coming months that will inject fresh impetus to the economy, according to Sheng Songcheng with the central bank.

In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2 percent from the central parity rate each trading day.

The central parity rate of the yuan against the US dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.

Posted in: MARKETS

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