(Bloomberg) -- China’s currency touched its highest level in almost three years amid signs that a trade war may be averted, before erasing gains as the greenback rebounded.
The yuan surged as much as 0.6 percent to 6.2418 per dollar on Tuesday to its strongest level since a devaluation in August 2015. The currency closed down 0.1 percent, while the offshore rate dropped 0.35 percent at 6:35 p.m. in Hong Kong.
Gains in the currency came as the Trump administration was said to be urging China to lower tariffs on cars and open its market to U.S. financial services as part of talks to resolve a rise in trade tensions. Adding to the bull case was last Friday’s announcement that China’s yuan-denominated bonds will be included in the Bloomberg Barclays Global Aggregate Index, which could prompt inflows of around $110 billion, according to Goldman Sachs Group Inc.
"Market sentiment has become more optimistic versus last week amid signs that both sides are willing to talk," said Gao Qi, Singapore-based strategist at Scotiabank
The currency is also gaining as the People’ Bank of China hasn’t signaled it will slow appreciation at any particular level, which may mean the yuan will test 6.2 per dollar soon, said Tommy Xie, an economist at Oversea-Chinese Banking Corp. in Singapore.
The yuan is heading for a fifth straight quarter of gains, its best winning streak in four years.
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With assistance from Helen Sun, Emma Dai