China's yuan strengthens 0.7% at open after holiday

[SHANGHAI] China's yuan opened trade at 6.5300 per dollar on Monday, strengthening 0.7 per cent from its previous close of 6.5755 before the long Chinese Lunar New Year holiday, partly buoyed by a stronger central bank midpoint, traders said.

The People's Bank of China (PBOC) set its midpoint 0.3 per cent stronger prior to the market open, the official fixing's biggest rise since Nov 2 last year.

Traders said the midpoint's strength reflected the dollar's global weakness last week.

The Chinese foreign exchange market was closed all last week for the Lunar New Year holiday.

During the break, the dollar index against a basket of currencies led by the euro dropped 1.5 per cent, pushing the offshore yuan 0.9 stronger during the same period.

The Chinese currency is under depreciation pressure because of the sharp slowdown of the world's second-largest economy and after the dollar had appreciated sharply against non-dollar currencies over the past several months until the greenback's sudden weakness since early February.

The dollar has lost steam on concerns that the US Federal Reserve may not be able to raise rates several times this year as expected due to volatile global markets and a weakening global economy.

The PBOC, the Chinese central bank, has taken a slew of steps aimed at keeping the yuan stable of late.

In an interview carried in the Chinese financial magazine Caixin over the weekend, PBOC Governor Zhou Xiaochuan said yuan exchange reform would help the market be more flexible in dealing with speculative forces betting on yuan depreciation.

REUTERS