China sets biggest one-day yuan rate increase since 2005

[SHANGHAI] China on Friday raised the exchange rate for the yuan against the US dollar by 0.92 per cent from the previous day, the biggest one-day increase in more than 11 years.

The People's Bank of China (PBOC), which has been battling to shore up the sagging yuan, fixed it at 6.8668 to the greenback, according to the China Foreign Exchange Trade System, which operates the national foreign exchange market.

That marked the strongest daily increase since July 2005, and comes as the yuan had flirted lately with the 7.0 to the US dollar mark, a threshold not crossed in more than eight years.

China only allows the tightly controlled yuan to rise or fall two per cent on either side of the daily fix, to prevent volatility and maintain control over the currency.

China's currency has been under pressure from uncertainty over the health of the world's second largest economy, massive capital outflows and the sharp rise in the US dollar following Donald Trump's election victory and anticipation of US interest rate hikes.

China said last week it would almost double the number of foreign currencies it uses to determine the official value of the yuan, thereby diluting the role of the US dollar as authorities seek to arrest the yuan's fall and project an image of stability in the unit.

AFP