Yuan gets room to set record high
The yuan hit a record high on Monday as persistent dollar selling by Chinese corporates drove the spot rate to its maximum daily limit under China's managed float regime, after the central bank set an unusually strong official daily midpoint.
The yuan has appreciated 1.0 percent so far this year, reversing a depreciation of as much as 1.6 percent in the year by late July, but the appreciation would have been greater if the central bank had not kept the market in check, either through its midpoint fixes or suspected intervention.
On Monday, the People's Bank of China (PBOC) fixed the midpoint at 6.2920 per dollar, the strongest the yuan has been fixed at since May. On Friday the midpoint was fixed at 6.3012 yuan to the dollar.
The spot exchange rate, which is allowed to rise or fall by 1 percent away from the midpoint on any given day, took full advantage of the new room. The yuan opened at 6.2310 to the dollar before swiftly moving to hit the yuan's strong-side limit at 6.2291. The spot rate had closed at 6.2450 yuan to the dollar on Friday.
It was the yuan's strongest open and intra-day trading level since China opened its domestic currency market in 1994.
The central bank has been trying to restrain the yuan by fixing midpoints that held the market back, but as a consequence the spot rate has repeatedly struck the yuan's strong- side limit every day for over two weeks.
Some market analysts
Be the first to comment.
