SHANGHAI: China's yuan inched up against the U.S. dollar on Thursday, after hitting a near two-week low hit during the previous session, while its value against a basket of major currencies surged to an eight-month high.
Although the onshore spot yuan continued to hover at the psychologically important 6.7 per dollar level, its value on a trade-weighted basis against a basket of its trading partners' currencies rose to 95.29, according to Reuters calculations based on official data, the highest level since early July.
The index, published on a weekly and monthly basis, stood at 95.14 last Friday, official data from the China Foreign Exchange Trade System (CFETS) showed.
A pledge by China's state planner on Tuesday to increase the flexibility of the yuan's exchange rate set off market speculation that it could herald changes to the tightly managed currency regime.
Prior to market opening on Thursday, the PBOC set the daily midpoint rate at 6.7110 per dollar, 57 pips or 0.08 percent weaker than the previous fix 6.7053.
In the spot market, onshore yuan opened at 6.7120 per dollar and was changing hands at 6.7103 at midday, 22 pips firmer than the previous late session close and 0.01 percent stronger than the midpoint.
The onshore spot yuan hit a low of 6.7188 on Wednesday, the weakest level since Feb.22, reflecting broad dollar strength and fresh worries over tensions on the Korean Peninsula following reports that North Korea is rebuilding part of a test rocket site.
Sentiment toward the yuan recovered on Thursday, traders said. Some investors said they do not expect any sharp moves in the yuan in the near term due to the annual gathering of parliament in Beijing.
Investors were also anxiously awaiting developments in the
Sino-U.S. trade talks, which have heavily affected the yuan's movements since April last year.
"Yuan still has some upside room if there is a trade deal reached between China and the United States," said a trader at a foreign bank. "At least a sizable depreciation in the yuan has been ruled out."
U.S. President Donald Trump said on Wednesday that trade talks with China were moving along well and predicted either a "good deal" or no deal between the world's two largest economies.
The global dollar index rose to 96.881 at midday, from the previous close of 96.873.
The offshore yuan was trading at 6.7165 per dollar as of midday.
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