China's yuan set a post-revaluation high against the dollar for the second straight day on Friday amid weakness of the US currency on global markets.
The yuan ended at 7.9943 to the dollar, up from Thursday's close of 7.9955, after China's central bank set the yuan's mid-point at a sharply higher 7.9956 versus 8.0001 on the previous day.
The mid-point is viewed as a way for the central bank to signal its intentions to the market, and traders said the central bank appeared content to allow the yuan to reflect the weakness of the US currency on the global front.
On Friday, the dollar hit a three-week low against the euro after the US Federal Reserve's policy meeting gave the clearest signal yet that it may soon take a break from its two-year campaign of interest rate increase. "That led to heavy selling of the dollar today," said a trader with a domestic Chinese bank.
The yuan's previous post-revaluation high was 7.9955, hit on Thursday. It has now appreciated by a further 1.45 percent since Beijing revalued the currency by 2.1 percent and depegged it from the dollar in July 2005.
Traders said it could easily test the psychologically important 7.9900 level in coming days if the dollar failed to rebound overseas.
Technically, the dollar has formed a clear downtrend against the yuan in recent weeks, remaining below the 14-day moving average - now at 8.00 - since early June. The average is seen as strong technical resistance for the dollar.
China is keen to cool its economy, which grew 10.3 percent year-on-year in the first quarter, and some have suggested currency appreciation as an effective tool.
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