Yuan on longest rally streak since 2021

The Chinese yuan rose 0.07% against the US dollar this morning to 7.1428 CNY per USD. The currency has gained 0.23% since the beginning of the week, marking its fifth consecutive weekly increase, the longest since May 2021.

Chinese yuan banknotes. Photo: Reuters

The yuan appreciated due to businesses' demand to exchange money when the US dollar weakened. However, the increase was also restrained as the market was cautious before the speech of the Chairman of the US Federal Reserve (Fed) at the conference in Jackson Hole on the morning of August 23. This speech is expected to give investors more clues about monetary policy decisions in the world's largest economy . Information released at this event can also affect global financial markets.

"The pressure on the yuan has been eased as the dollar has weakened over the past month on expectations of a Fed rate cut. If the Fed cuts rates quickly, the interest rate differential will shift, helping the yuan strengthen further," said Lynn Song, chief economist for Greater China at ING.

USD/CNY exchange rate developments over the past year. Photo: Reuters

However, Chinese officials predict that the yuan will continue to maintain its exchange rate stability. For more than a year, the People's Bank of China (PBOC) has always set the daily yuan price stronger than market forecasts. Analysts say this move is aimed at maintaining stability and providing necessary support for the domestic currency.

The yuan trades within a 2% band from the PBOC's daily reference rate. Today, the reference rate is 7.1358 CNY per USD. The gap between the official rate and market forecasts has also gradually narrowed in recent weeks.

Source: https://congthuong.vn/nhan-dan-te-voi-chuoi-tang-gia-dai-nhat-ke-tu-nam-2021-340997.html