Yuan hits highest rate in almost two decadesThe yuan rose to its highest level since 1993, nearing the strong end of the trading range allowed by China’s central bank, on speculation that policy makers will take more steps to counter a slowdown in the Chinese economy.
Financial markets opened today after a week-long holiday, during which the Chinese Communist Party said its 18th Congress will start on Nov. 8. The event, which this year will feature a once-a-decade handover of power to a new generation of leaders, could result in increased stimulus to counter an economic slowdown, according to research notes last week from Mizuho Securities Asia and Australian & New Zealand Banking Group. The U.S. jobless rate dropped to 7.8 percent in September, the lowest level since January 2009, data showed on Friday.
“The date of the Congress signals that political issues have been set aside and the leaders will focus on reviving the economy,” said Daniel Chan, executive vice president at Glory Sky Global Markets in Hong Kong. “The U.S. data are encouraging for Chinese exports, which also supports the yuan.”
Yesterday’s high of 6.2812 was the strongest level since China unified official and market exchange rates at the end of 1993 and exceeded the central bank’s reference rate by a record 0.98 percent, near to the maximum 1 percent divergence that is permitted.
The People’s Bank of China lowered its daily fixing by 0.03 percent yesterday to 6.3426 per dollar. That was 0.9 percent weaker than the closing spot price on Sept. 28.
Manufacturing in China shrank in August and September, contracting in consecutive months for the first time since 2009, according to a government-backed Purchasing Managers’ Index published on Oct. 1. The gauge was 49.8 in September, compared with 49.2 in the previous month.
In Hong Kong’s offshore market, the yuan weakened 0.02 percent to 6.2985 per dollar. Twelve-month non-deliverable forwards were little changed at 6.3955, a 1.7 percent discount to the spot rate in Shanghai.
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