China’s currency has surged by the most in over a decade, in line with the decline of the dollar in the past week.
China's Yuan Rises Most In More Than a Decade
The Yuan rose 1.2 percent to 6.4975 against the dollar, the highest rise since the country halted a peg to the dollar in 2005. According to reports by Bloomberg, the offshore Yuan rose by 0.26 percent up to 6.4917, 0.09 percent stronger than the offshore rate.
Last week saw the highest rise in more than a decade when the Yuan rose by 1 percent during the Lunar New Year holidays.
On Monday, the People’ Bank of China raised the Yuan’s daily rate against the US dollar, restricting onshore movement to a maximum of 2 percent up to 6.5118, the highest rise since November.
In the past week, the dollar’s strength declined by 0.8 percent while the Yuan rose by 3 percent and the Euro by 0.9 percent.
According to Zhou Xiochuan, the Governor of the People’s Bank of China (PBOC), the country has normal capital outflows, a stable exchange rate and a good balance of payments.
In January, China’s foreign-exchange reserves declined by $99.5 billion, the second largest decline in the country’s history, as the central bank sold dollars to restrict the depreciation of the Yuan.
According to Bloomberg Intelligence, China experienced up to $1 trillion worth of capital outflows last year alone.
Ken Cheung, a strategist at the Hong Kong-based Mizuho Bank said, “In the short term, the governor’s comments coupled with the strong fixing against the dollar indicate the PBOC’s consistent opinion on the need to stabilize the yuan.”
He added, “Containing the anticipated depreciation of the Yuan and restricting capital outflows are a priority.”
In January, the country’s exports fell by 11.2 percent while imports fell by 18.8 percent resulting in $63.3 billion trade surplus.