Yuan Rises to One-Week High as PBOC Boosts Fix Amid Dollar DropBloomberg News
China sets stronger reference rate for a second straight day
Moves to slow weakening aimed at boosting confidence: analyst
The yuan climbed to its strongest level in a week, as Chinese authorities work to halt the currency’s recent plunge with stronger fixings and a verbal defense.
The currency rose as much as 0.26 percent to 6.8900 per dollar, the strongest level since Nov. 22, before trimming the gains to trade 0.24 percent stronger as of 5:31 p.m. local time. The offshore rate climbed 0.09 percent to 6.9215. A Bloomberg replica of the CFETS RMB Index, which tracks the yuan against 13 exchange rates, gained for the first time in three days.
The People’s Bank of China strengthened its fixing to 6.8889 per dollar on Tuesday as a gauge of the greenback’s strength fell overnight. Yi Gang, the central bank’s deputy governor, said on Sunday the yuan will remain stable in the future and the nation’s foreign reserves are "very ample." The currency slumped to the weakest level in eight years last week amid the dollar’s climb, sparking concerns that it would hit 7 this year as capital leaves the nation.
"The government wants to take the chance of a dollar retreat to ease the yuan’s recent slump as too big a drop will erode confidence and lead to faster capital outflows," said Kenix Lai, a Hong Kong-based foreign-exchange analyst at Bank of East Asia Ltd. "In the short-term, the offshore yuan could strengthen beyond the 6.9 handle and the onshore rate could stay stronger than that. But in the medium-term, the yuan will still depreciate as the greenback’s rally hasn’t ended yet."
China is said to be contemplating more capital restrictions that could prevent the yuan from tumbling. The State Administration of Foreign Exchange has begun putting its approval of pending outbound investments on hold under certain conditions, people with knowledge of the matter said, and the deals will be approved by the regulator only after they pass additional reviews by other government agencies.
— With assistance by Tian Chen