Business | Markets

China’s yuan rises versus dollar on central bank guidance, approaches record high

Longer term, yuan supported by China’s improving economy

  • Reuters
  • Published: 16:38 September 2, 2013
  • Gulf News

Shanghai: China’s yuan edged up against the dollar on Monday, coming within sight of record highs after the central bank set a slightly stronger fixing that was seen reflecting official intentions to let the Chinese currency appreciate for now.

Spot yuan changed hands at 6.1166 per dollar at midday, up 0.05 per cent from the previous close, after the People’s Bank of China (PBOC) set its midpoint at 6.1702, up from Friday’s 6.1709.

The currency is now within arm’s reach of 6.1090 versus the dollar, its most recent all-time high.

“The midpoint’s strength today, albeit minor, is not backed by the dollar’s movements in global markets, and is a clear signal that the PBOC wants the yuan to rise for now,” said a dealer at a European bank in Shanghai.

“The market has taken the PBOC’s cue, but believes the central bank’s move may be temporary, aimed at the G20 summit to be held in Russia later this week.”

The Chinese government has traditionally let the yuan appreciate ahead of major international political events, which traders suggest is a preemptive gesture to trading partners who argue the currency is still undervalued.

Many traders, however, believe the yuan’s potential for further appreciation will be limited in the near future, given sweeping depreciation in other Asian currencies that compete with China for a share of global exports.

China’s factory activity expanded for the first time in four months in August as domestic demand rebounded, a private survey showed on Monday, the latest sign that the world’s second-largest economy may have avoided a sharp slowdown.

The final Markit/HSBC Purchasing Managers’ Index (PMI) climbed to 50.1 in August, up sharply from July’s 47.7 and in line with last week’s flash preliminary reading.

“While China’s economy is just recovering from its recent troughs in the second quarter, it is not strong enough to support another round of yuan appreciation in particular with the weakening of most Asian currencies looming in the background,” said a dealer at a Chinese commercial bank in Shanghai.

The yuan has gained 1.86 percent so far this year, bucking a weakening trend in emerging market currencies. The bulk of those gains, however, occurred in April and May, ahead of a slew of major political events, including a G20 meeting and Chinese President Xi Jinping’s visit to the United States.

Gulf News
Business Editor's choice
Quick Access

  1. Markets

  2. Economy

  3. Property

  4. Aviation

Business Top Stories

  1. DP World opens major container facility

  2. Shuttle bus service between Dubai airports

  3. Regulators to monitor over-the-counter swaps

  4. Consumers to ‘tap’ for everyday spending

  5. China auto show opens