China's yuan jumps to strongest level in 7-1/2 months on weaker US dollar

[SHANGHAI] China's yuan strengthened further against the US dollar on Thursday to its highest level in seven and-a-half months, reflecting the dollar's broad weakness.

The People's Bank of China set the yuan midpoint rate at 6.794 per US dollar prior to market open, its strongest level since June 15.

Thursday's official guidance was 113 pips or 0.2 per cent firmer than the previous day's fixing at 6.8053 per US dollar.

The strength in the yuan fixing followed a weaker US dollar trend in global markets. The US dollar index, which measures its strength against six other currencies, fell to a low of 95.754 on Thursday - the lowest level since last October.

In the spot market, the losses in the US currency pushed the yuan higher. The yuan opened at 6.7966 per US dollar, and rose to a high of 6.7722 per US dollar in initial trade.

As of 0230 GMT, the yuan was changing hands at 6.7818, the strongest level since Nov 9 2016, 179 pips firmer than the previous late session close and 0.18 per cent stronger than the midpoint.

A Shanghai-based trader at a Chinese bank said Thursday's fixing matched their expectations.

"The sudden gains in the yuan were mainly due to strength in non-dollar currencies," the trader said.

The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 94.31, weaker than the previous day's 94.33.

The global US dollar index fell to 95.812 as of 0230 GMT from the previous close of 96.01.

The offshore yuan was trading 0.13 per cent weaker than onshore spot at 6.7908 per dollar at 0230 GMT.

Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.9600, 2.39 per cent weaker than the midpoint.

One-year NDFs are settled against the midpoint, not the spot rate.

REUTERS