SHANGHAI, Nov 23: China’s yuan firmed in morning trade on Friday as the central bank set the midpoint at its strongest point this week, inversely tracking the global dollar index which has slid all week.
The yuan changed hands at 6.2277 per dollar at midday, minutely stronger than Thursday’s close at 6.2289. The spot exchange rate advanced as far as the official daily trading range allowed almost immediately after market open, just as it did on Thursday.
The exchange rate can rise or fall 1 percent from the mid-point set by the central bank each day. The central bank set its midpoint at 6.2906 per dollar on Friday, compared to Thursday’s fix of 6.2918.
The yuan hit a record high against the dollar on Nov. 14. On that day the yuan changed hands at 6.2252 per dollar – which was the intra-day limit of the trading band, implying that the rate could have appreciated further had the central bank allowed it to.
Since then the central bank has used weaker midpoints to mathematically prevent the spot exchange rate from testing new highs.
The yuan began rallying against the dollar in late July, but the rally gained momentum when an unexpectedly large trade surplus in October poured more dollars into the system, most of which the central bank neglected to sterilise.
The yuan is only up 1 percent since the start of the year, but is 2.7 percent off its July lows. Many traders believe the Chinese currency could appreciate further in the near term and may close around 6.2 by the end of this year, but they see the rally ending next year as the dollar overhang subsides.
Meanwhile, a Reuters poll showed that bullish bets on the Chinese yuan jumped to the largest since mid-January over the past two weeks.
The State Administration of Foreign Exchange said Wednesday that the rally did not appear to attract hot money inflows in October and that the exchange rate remains ‘basically stable.’ (AGENCIES)
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