The Chinese yuan pushed higher on Thursday, with the currency hitting its strongest level since March 2016 against a broad basket of peer currencies.
The yuan grew 0.2% to 98 points against a group of 24 exchange rates, topping its previous peak from 2018. The currency gained as much as 0.3% to 6.3943 per US dollar, the highest since June 2018.
The People’s Bank of China hasn’t taken regulatory steps to control the currency’s appreciation trend this week. The regulator opted to track moves in the market rather than using it to limit growth, as Beijing is struggling to balance export demand with surging commodity prices.
Moreover, less controlled exchange-rate fluctuations may turn the yuan into a more internationally identifiable currency.
“The biggest negative impact of yuan appreciation is to reduce export competitiveness, but recovery of global supply is still on the way,” Zhang Yu, chief analyst at Huachuang Securities said, as quoted by Reuters.
“Exports remain strong and bargaining power is sufficient. The stronger yuan has not caused significant damage to export competitiveness since the second half of last year.”
The latest optimism was also raised by the first official trade talks between China and the new US administration.
“China at least so far isn’t very concerned with the rally, because it’s been trying to boost domestic demand to aid growth and dealing with higher global commodity prices; a strong yuan helps Beijing achieve these goals,” Eddie Cheung, senior emerging markets strategist at Credit Agricole CIB, told Bloomberg.
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