SHANGHAI: China’s yuan had a catch-up rally and surged to a six-week high against the dollar on Monday, the first trading day after the long Labor Day holiday, as the central bank set a much strengthened midpoint fixing to track offshore movements.
While mainland China’s markets were closed for three days last week, the offshore yuan had risen on the back of the dollar’s broad retreat after data showed a cooling US jobs market, Federal Reserve Chair Jerome Powell confirmed the central bank’s easing bias and suspected Japanese government interventions pushed the yen higher.
The offshore yuan was last at 7.2185 per dollar, after gaining more than 1% last week.
“Japan’s intervention should have a larger impact on the yuan as an additional source of stability in the region, which eases the pressure on the CNY trade weighted index (TWI), in the near term,” analysts at Goldman Sachs said in a note.
Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.0994 per dollar, 69 pips firmer than the previous fixing of 7.1063 on April 30.
Monday’s guidance fix was the strongest since April 15.
However, the central bank continued its months-long practice of setting the rate at levels firmer than market projections, widely viewed by traders as an attempt to keep the currency stable.
It was 1,133 pips stronger than a Reuters estimate of 7.2127.
Monday’s midpoint dragged the yuan’s value against its major trading partners, as measured by the CFETS index, to 100.02, the lowest level since April 11, according to Reuters calculations based on official data. But the CFETS index was still up 2.67% so far this year.
In the spot market, the onshore yuan opened at 7.2009 per dollar, the strongest level since March 25. It traded at 7.2142 by midday, 108 pips firmer than the previous late session close on April 30.
Separately, traders and analysts said that recent gains in Hong Kong shares also lent support to the currency.
“The ongoing bull market in Hong Kong stocks provided positive sentiment support for the renminbi,” said Tommy Xie, head of Greater China research at OCBC Bank.
Hong Kong’s benchmark Hang Seng Index has gained more than 4% so far in May, after booking its best month since January 2023 in April By midday, the global dollar index rose to 105.093 from the previous close of 105.03.
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