China fixes yuan stronger vs dollar, reversing falls

[SHANGHAI] China's central bank on Friday raised the yuan currency against the US dollar by 0.05 per cent, the national foreign exchange market said, ending three days of falls after a surprise devaluation.

The daily reference rate was set at 6.3975 yuan to US$1.0, up from 6.4010 the previous day, the China Foreign Exchange Trade System said. The rate was also slightly stronger than Thursday's close of 6.3982 yuan.

The stronger fixing for the yuan came after the People's Bank of China (PBoC) reassured financial markets by pledging to seek a stable currency after a shock devaluation of nearly two percent on Tuesday.

The cut, and two subsequent reductions, sent global financial markets into a tailspin as it raised questions over the health of the world's second-largest economy and fears of a possible currency war.

Beijing said the move was the result of switching to a more market-oriented method of calculating the daily reference rate which sets the value of the yuan, also known as the renminbi (RMB).

Previously, authorities based the rate on a poll of market-makers, but will now also take into account the previous day's close, foreign exchange supply and demand and the rates of major currencies.

The currency is still only allowed to fluctuate up or down two per cent on either side of the reference rate.

AFP