SHANGHAI: China’s onshore yuan broke through the key psychological level of seven to the dollar on Tuesday for the first time in 2-1/2 years, despite a weaker midpoint set by the central bank, as exporters rushed to sell US dollars before the year ends.
In early afternoon trading, it hit 6.9951 per dollar, the strongest since May, 2023. The yuan has gained roughly 5 percent against a softening dollar since early April.
The People’s Bank of China has sought to prevent the yuan from overshooting through weaker guidance rates and verbal warnings in state media, but has not been able to reverse the currency’s strengthening trend.
“Yuan breaching 7/USD is more a signal than any real shock,” said Charu Chanana, chief investment strategist at Saxo in Singapore.
On Tuesday, the central bank set the midpoint rate at 7.0348 per dollar, 236 pips weaker than Reuters’ estimate. The spot yuan is allowed to trade a maximum of 2 percent either side of the fix each day.