Yuan’s Rally Under Test After Banks Tweak Daily Reference Rate
- Some banks halt use of counter-cyclical factor used in fixing
- Yuan is near its strongest versus the dollar since July 2018
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The recent strength in China’s currency faces a new hurdle after the nation’s banks abandoned inclusion of a key factor used to calculate the yuan’s daily reference rate.
The lenders stopped using the counter-cyclical factor recently, according to a statement on the website of China Foreign Exchange Trade System. The factor is part of how the banks calculate a quote for the reference rate, known as the fixing, which they submit to the People’s Bank of China for a final rate every morning. The fixing restricts the onshore yuan’s moves by 2% on either side.