Rate rise lifts yuan to 2-week high
Print Edition
THE yuan yesterday rose against the US dollar to a two-week high after the central bank raised the reference rate by the largest in 20 months amid fresh signs the Chinese economy is stabilizing.
The yuan closed at 6.2403 per US dollar yesterday, up 0.16 percent from last Friday, the largest daily climb since May 29.
The yuan gained after the People’s Bank of China raised the central parity rate to 6.1485 from 6.1623 on Friday, or by 0.22 percent — the largest in 20 months in percentage terms.
The PBOC’s move signaled the confidence of policy-makers in the Chinese currency after the country’s trade surplus was wider than expected.
Exports rose in May by 7 percent from a year earlier to US$195.4 billion while imports fell 1.6 percent to US$169.5 billion, giving a substantially wider trade surplus of US$35.9 billion from US$18.5 billion in April.
“The surplus may continue to widen and will add appreciation pressure on the yuan in the future,” said Lian Ping, chief economist with the Bank of Communications. “We think the yuan will be less likely to shed further.”
Jonathan Cavenagh, an analyst at Westpac Banking Corp, said the bank is now more upbeat about the yuan due to better outlook for leading economic indicators, further improvement in the trade surplus, and stronger-than-expected onshore yuan fixing.
Nomura last week raised China’s annual economic growth forecast for the second quarter to 7.4 percent from 7.1 percent, and to 7.5 percent for the full year from 7.4 percent.
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