China fixes yuan at three-month high as dol­lar sinks

The Pak Banker - - FRONT PAGE -

China's cen­tral bank fixed its cur­rency ex­change rate at a three-month high against the US dol­lar on Fri­day as the green­back sank. The Peo­ple's Bank of China (PBoC) set the yuan at 6.4628 to $1.0, up 0.51 per­cent from the fix on Thurs­day, ac­cord­ing to the China For­eign Ex­change Trade Sys­tem. It marked the strong­est level for the cen­tral rate since De­cem­ber, as well as its big­gest pos­i­tive move since Novem­ber.

Au­thor­i­ties only al­low the yuan to rise or fall two per­cent on ei­ther side of the daily fix, to pre­vent volatil­ity and main­tain con­trol over the cur­rency. In trad­ing on Fri­day, the on­shore yuan was quoted at 6.4727 to $1.0 at 4:30 pm (0830 GMT), up 0.31 per­cent from the pre­vi­ous day's close. The US dol­lar has sunk since the Fed­eral Re­serve sur­prised mar­kets by re­duc­ing its pro­jec­tions for in­ter­est rate in­creases this year, cit­ing the slower global econ­omy and mar­ket tur­moil.

"The mar­ket is now ex­pect­ing the Fed to raise bor­row­ing costs fewer times this year, which eases cap­i­tal out­flow pres­sures from emerg­ing mar­kets and sup­ports Asian cur­ren­cies, in­clud­ing the yuan," Kenix Lai, a for­eignex­change an­a­lyst at Bank of East Asia in Hong Kong, told me­dia. "But the PBoC won't likely al­low sig­nif­i­cant ap­pre­ci­a­tion of the yuan be­cause a cur­rency that's too strong will hurt China's ex­ports and eco­nomic fun­da­men­tals." China's State Ad­min­is­tra­tion of For­eign Ex­change on Wed­nes­day said: "The pres­sure from cross-bor­der cap­i­tal out­flows has slowed down sig­nif­i­cantly" and fore­cast they would re­main sta­ble.

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