- Currency rises ahead of weekend meeting of G-20 finance chiefs
- Yuan trade-weighted basket advances most since February
China’s central bank strengthened the yuan’s daily fixing by the most in three weeks, keeping it from slipping past 6.7 against the dollar, before a gathering of finance chiefs of the world’s largest economies.
The monetary authority increased its reference rate, which restricts onshore moves to 2 percent either way, by 0.11 percent to 6.6872 per dollar. This is the second day in a row it has raised the fixing against an advancing U.S. currency, spurring speculation it isn’t sticking to its stated policy of following the direction of the market. Group of 20 finance heads will meet in China July 23-24, where they are expected to reaffirm that countries shouldn’t weaken their currencies to help their economies.
The onshore currency rose 0.06 percent to 6.6756 a dollar as of 5:21 p.m. in Shanghai, according to China Foreign Trade System prices, after dropping past 6.7 for the first time since 2010 on Monday. The offshore yuan fell 0.02 percent to 6.6799. A Bloomberg replica of the CFETS RMB Index, which tracks the yuan against 13 currencies, climbed 0.4 percent, the most since February, to 95.12.
"The yuan is likely to stabilize around 6.70 for a few weeks," said Nathan Chow, an economist at DBS Group Holdings Ltd. in Hong Kong. "Given the strong depreciation expectation recently, it’s natural the People’s Bank of China would want to stabilize the market a bit. Speculators wouldn’t want to short aggressively ahead of the G-20 meeting, fearing that the PBOC would intervene."
The Chinese currency has declined 2.7 percent this year in Asia’s biggest drop, on slowing economic expansion and a rising dollar. There’s a great deal of speculation that the authorities are preventing the exchange rate from slipping past 6.7 against the greenback, Sue Trinh, Royal Bank of Canada’s Hong Kong-based head of Asian foreign-exchange strategy, said Wednesday.
The yuan’s share of global payments shrank to the least in two years as the currency’s depreciation pressures undermined China’s efforts to expand its global use. The yuan’s share of transactions declined to 1.72 percent last month, the lowest since October 2014, according to the Society for Worldwide Interbank Financial Telecommunications.
— With assistance by Helen Sun