SHANGHAI: China’s yuan edged lower on Friday but remained on track for its 12th consecutive week of gains — marking its longest weekly winning streak in 13 years — as exporters accelerated dollar sales ahead of the Lunar New Year.
The onshore yuan traded at 6.9068 per dollar around midday, slightly weaker than the previous close of 6.9033. Meanwhile, the dollar index rebounded 0.03% in Asian trading.
Despite Friday’s dip, the yuan has risen about 0.4% this week, recording its strongest weekly performance of the year and its longest stretch of weekly gains since late 2012. On Thursday, the currency touched its firmest level in 33 months.
Analysts attribute the recent rally partly to seasonal dollar selling by exporters bringing home receipts from robust trade activity ahead of the holiday period. However, the People’s Bank of China (PBOC) has so far refrained from direct market intervention.
Caitong Securities noted in a research report that the central bank possesses a “rich toolkit” and can act with precision and restraint if the currency strengthens too rapidly. In a move seen as an effort to moderate the yuan’s pace of appreciation, the PBOC set the daily midpoint guidance at 6.9398 per dollar — 350 pips weaker than the Reuters estimate. The yuan is permitted to trade within a 2% band on either side of the official midpoint each day.
Market observers also highlighted a positive feedback loop between the stronger currency and China’s equity markets.
According to Topsperity Securities, the yuan’s strength has helped underpin stock market resilience, even as trading volumes typically thin ahead of the Spring Festival holiday.“The recent strength in the yuan’s exchange rate is contributing to the stock market’s stability,” the brokerage said in a note
