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Yuan rises most in three months as PBOC official vows stability

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The yuan advanced by the most in more than three months after an official from China's central bank said the currency is strong compared with other exchange rates and the nation's foreign reserves are ample.

[BEIJING] The yuan advanced by the most in more than three months after an official from China's central bank said the currency is strong compared with other exchange rates and the nation's foreign reserves are ample.

The currency rose 0.23 per cent, the most since Aug 10, to 6.9012 per US dollar as of 10:48am in Shanghai. The offshore rate climbed 0.29 per cent. A Bloomberg replica of the CFETS RMB Index, which tracks the yuan against 13 exchange rates, is close to its strongest level in three months.

The yuan hovered around its weakest level in eight years last week, as the greenback surged amid speculation US President-elect Donald Trump's reflationary economic policies will trigger faster monetary tightening.

The yuan's recent depreciation against the US dollar has been small compared with most currencies, and it will continue to remain stable in the future, according to a statement that the People's Bank of China posted on its website that cited an interview deputy governor Yi Gang gave to the official Xinhua News Agency on Sunday.

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The nation's foreign-exchange reserves are "very ample" and capital will flow back to the country as the economy recovers and the business environment improves, Mr Yi said. The stockpile fell to US$3.1 trillion in October, the lowest level since 2011.

"The Chinese government may have judged that the recent slump has been too quick and the yuan is close to a fair level for now, so it's time to make some positive comments to support the currency," said Banny Lam, head of research at CEB International Investment Ltd in Hong Kong.

"The yuan will rebound in the next few days, but the strength will be short-lived as the dollar will continue to advance before the Federal Reserve hikes in December."

The odds of a rate hike by the Fed by the end of the year have risen to 100 per cent.

Mr Yi's comments came after Chinese media last week sought to project an image of controlled descent of the currency. The PBOC-run Financial News argued on Friday that the yuan's volatility is a "natural reaction" to global foreign-exchange moves and the market is no longer expecting a "bottomless fall."

Xinhua said on Nov 21 that stability is a priority.

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