BUSINESS Yuan advances to new 27-month high

BUSINESS

Yuan advances to new 27-month high

Shenzhen Daily

07:47, October 22, 2020

China’S onshore spot yuan advanced further yesterday and finished its domestic trading session at 6.6575 per U.S. dollar, its strongest such close since July 10, 2018. (Photo: Shenzhen Daily)

The strong gain was led by a firmer central bank guidance and recent upbeat economic data that showed a sustained recovery in the world’s second-largest economy.

Prior to market opening, the People’s Bank of China set the midpoint rate at 6.6781 per U.S. dollar, 149 pips or 0.22 percent firmer than the previous fix of 6.6930 and the strongest guidance since July 16, 2018.

Traders and analysts said yesterday’s stronger official fixing largely matched market projections and drove the spot market higher.

“The yuan continues to strengthen due to its superior economic backdrop relative to other currency trades and sets it at the top of the macro heap,” said Stephen Innes, chief global markets strategist at Axi.

“The better retail sales data for September continues to resonate and signals that domestic demand is holding up.”

Official data released this week showed China’s economic recovery accelerated in the third quarter as consumers shook off their coronavirus caution.

A trader at a foreign bank said the yuan could march towards 6.6 per dollar level in the near term if authorities do not step in. Several currency traders also noted how far the yuan could rise largely depended on the regulator’s attitude on recent rallies.

“Yuan appreciation could have a contractionary effect on the economy, the central bank apparently does not want to see too rapid a rise in the exchange rate,” said Xie Yaxuan, chief macro analyst at China Merchants Securities.

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