Yuan holds near multi-year peak as PBOC keeps fixings firm
China's onshore yuan ticked up to 6.6551 per dollar, hovering just below its strongest level in more than four years, as traders tracked central bank guidance and waited on the outcome of US midterm voting.
The offshore version of the currency followed a similar path, rising about 0.01% to 6.6529 per dollar. Both measures stayed within reach of last Friday’s high point of 6.6523, a level not seen in more than four years.
Earlier in the day, the People’s Bank of China set its reference rate at 6.7146 yuan per dollar — some 521 pips softer than what Reuters had projected at 6.6625. Under current rules, the onshore exchange rate can drift up to 2% in either direction from this benchmark.
According to traders and analysts quoted by Reuters, the central bank has progressively firmed its daily reference points throughout the year, even as those fixings have typically landed below where markets expected them. Observers read this as evidence that officials are controlling how fast, rather than whether, the currency climbs.
Strategists at ANZ said the broader upward trajectory for the yuan remains intact, pointing out that regulators have been setting stronger benchmarks without working against the currency’s gains. They anticipate this pattern continuing as the country gets ready to welcome leaders for the APEC summit this month.
In a related development, the central bank pumped extra cash into the financial system on Monday while completing a formal transition of its benchmark interest rate toward an overnight lending rate. Analysts suggested this move might loosen funding conditions and bolster broader economic momentum. Meanwhile, local investors continue to watch for any stimulus Beijing might direct toward equities, following a stretch in October when blue-chip Chinese shares suffered their weakest monthly showing in more than ten years.
On the international stage, the dollar and other leading currencies traded within narrow bands as participants awaited results from the US midterm vote, a contest that could reshape congressional control and the direction of fiscal policy.
A stronger yuan paired with hints of policy loosening in China tends to influence broader risk appetite, the dollar’s standing against Asian and emerging-market currencies, and overall expectations for demand linked to the Chinese economy.
Source: Economic Times Markets