Chinese yuan extends rally, hits 10-month high against USD
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E-mail Xinhua, August 11, 2017
Chinese yuan extended its rally Friday, with its central parity rate strengthening by 128 basis points to 6.6642 against the U.S. dollar, the highest level in more than 10 months.
The adjustment came after a rise of 305 basis points Thursday and a rise of 109 basis points Wednesday, according to China Foreign Exchange Trade System.
Both onshore and offshore yuan rates have been rising against a continuously falling dollar, since late May this year. By some estimates, the yuan has strengthened by nearly 3,000 basis points since the beginning of this year.
A weaker dollar, coupled with stronger economic fundamentals, contributed to the rally, analysts said.
According to Xie Yaxuan, an analyst with China Merchants Securities, the U.S. dollar index, a measure of the value of the dollar against a basket of foreign currencies, has dropped nearly 10 percent since the beginning of this year, contributing to a relative rise of the Chinese currency.
The yuan is also supported by economic data with restructuring providing fresh signs of stabilization for the economy, said analysts.
China's economy expanded 6.9 percent on H1, with consumption and services, together with new innovation-driven economic sectors, taking larger roles in the economy.
The People's Bank of China said Monday that foreign exchange reserves rose for a sixth month in July to hit 3.1 trillion U.S. dollars, increasing 23.9 billion U.S. dollars from a month earlier.
It is the first time since June 2014 that reserves have expanded for six straight months.
According to Wang Chunying, an official with the State Administration of Foreign Exchange, cross-border capital flow has stabilized in H1, and the supply and demand in the foreign exchange market has reached the most balanced level in about three years.
Under the market-based, managed floating exchange rate system, the yuan can rise or fall by 2 percent against the U.S. dollar from the central parity rate each trading day.
The central parity rate is a weighted average of quotes from dealer banks, and follows a formula based on the previous day's closing rate and changes in a basket of selected currencies.
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