(Bloomberg) -- The yuan strengthened for a third day in a row, rising to its highest in just over a week, as the People’s Bank of China raised its daily reference rate on the back of a weakening dollar.
The Chinese currency rose 0.51 percent to 6.8514 per dollar, its strongest since Aug. 10, as of 4:38 p.m. in Shanghai. The PBOC strengthened its fixing, which restricts the yuan’s moves by 2 percent on either side, by the most since Aug. 2. It was stronger than the average forecast of traders and analysts for an eighth day.
The yuan’s recent advance has trimmed its slump since mid-June to around 6.6 percent, amid speculation that policy makers sought to limit outflows and as offshore liquidity tightened. The moves come as China plans to send a delegation to the U.S. later this month, stoking hopes of a revival of trade negotiations that stalled in June.
Chinese banks sold the most foreign-exchange to their clients since January 2016 on a net basis in the forwards market in July, reflecting weaker onshore demand for the yuan, according to official data released on Friday. The lenders also sold more overseas currencies to customers than they bought from them in the spot market for the first time since March, the data showed.
“The market has become more cautious -- investors know if they keep pushing the yuan weaker, more currency management measures from the PBOC will be triggered,” said Tommy Xie, economist at Oversea-Chinese Banking Corp. in Singapore. “I don’t think there will be significant fund flight as officials are already taking preemptive measures to prevent that.”
The offshore yuan edged 0.08 percent lower to 6.8421 per dollar on Monday. The currency jumped 1.23 percent last Thursday, its biggest gain since January 2017. It followed that with a 0.38 percent advance on Friday.
©2018 Bloomberg L.P.
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