China's Central Bank Is Embracing a Supercharged Yuan

Genuine bundles of Chinese one-hundred yuan banknotes are arranged for a photograph.

Photographer: SeongJoon Cho/Bloomberg

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With the dollar languid in the absence of supportive rate-hike rhetoric from Jackson Hole, the People’s Bank of China set the strongest yuan fixing in a year on Monday, exceeding the average forecast of 18 traders and analysts surveyed by Bloomberg.

The signal that Chinese policy makers are comfortable with yuan strength saw the currency trade below 6.65 per dollar onshore, a level the yuan seemed to have stalled at following a hefty advance. The currency is the best performer in Asia this month, and shows no signs of slowing down.

Gains could now be further supported as individuals and companies within China jump on the bandwagon, says Tommy Xie, an economist at Oversea-Chinese Banking Corp. Chinese have hoarded foreign currency amid yuan weakness the past two years, and as those positions are unwound the yuan could gather even more momentum, Xie said.

— With assistance by Ran Li

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