Yuan rises to 15½-month high against dollar

SHANGHAI: China’s yuan advanced further against the dollar yesterday to the strongest level in 15 months, thanks to a beefed-up central bank fixing and heavier corporate dollar sales.

The Chinese currency has strengthened against the greenback over the past few months, with the onshore spot rate rising 2.1% to book its best month on record in August – a rare run for a currency that usually trades in a wafer-thin range.

Prior to market opening yesterday, the People’s Bank of China raised its official yuan midpoint to 6.5668 per dollar, the sixth straight gaining session and the strongest level since June 23, 2016.

The higher fix follows gains in the spot yuan rate on Friday, traders said, adding yesterday’s guidance largely matched their forecasts.

Yesterday’s midpoint was 241 pips or 0.37% firmer than the previous fix of 6.5909 set on Friday.

In the spot market, the yuan opened at 6.5555 per dollar and rose to a high of 6.5476, the strongest level since May 23, 2016.

The spot yuan was changing hands at 6.5489 at midday, 107 pips firmer than the previous late session close and 0.27% stronger than the midpoint.

A trader at an Asian bank in Shanghai said the onshore yuan trade continued “following the flow”, meaning corporate dollar selling in morning trade was heavy enough to push the yuan higher.

Some market participants said they were concerned about short-term dollar volatility amid heightened tensions on the Korean peninsula.

North Korea said it tested an advanced hydrogen bomb for a long-range missile on Sunday, prompting the United States to warn of a “massive” military response if it or its allies were threatened.

The Chinese currency gained around 1.4% against the US dollar last week, the best weekly performance since July 2015, when it was revalued and taken off a fixed dollar peg.

However, the yuan only rose 0.7% on a trade-weighted basis against a basket of currencies of its trading partners, according to official data from the China Foreign Exchange Trade System. The index stood at 94.42 last Friday. – Reuters