Home Page | Photos | Video | Forum | Most Popular | Special Reports | Biz China Weekly
Make Us Your Home Page

News Analysis: Yuan on road to two-way volatility

English.news.cn   2014-06-11 15:25:29

BEIJING, June 11 (Xinhua) -- The value of the Chinese currency renminbi, or the yuan, weakened 55 basis points to 6.1506 against the U.S. dollar in its central parity on Wednesday, ending its sharp three-day rise.

From Friday to Tuesday, the yuan's strength against the U.S. dollar in its central parity increased 257 basis points, the largest three-day move since April 2013, according to an HSBC research note. On Monday alone, the yuan gained 138 basis points to 6.1485 against the U.S. dollar.

The central bank, or the People's Bank of China (PBoC), is sending a strong message to the market that the yuan will behave with greater two-way volatility and the timing for re-injecting volatility is also a nod to tentatively stabilizing economic conditions, as indicated by May exports, according to Wang Ju, senior foreign exchange strategist at HSBC.

The central bank's actions are in line with its focus on foreign exchange policy this year, inducing more volatility in the exchange rate to discourage one-way positioning, be it on the positive or negative side, Wang said.

The yuan depreciated from early January to early June this year, with the central parity of the yuan against the U.S. dollar down 1.12 percent and that in the spot market down 3.55 percent.

Lian Ping, chief economist of the Bank of Communications, said that as trade data picked up in May following weak performances in four months, investors may have different expectations of the Chinese currency and this round of depreciation may have come to an end with two-way fluctuations possible in the future.

China's exports rose 7 percent year on year to 195.47 billion U.S. dollars in May.

Wang said that it is still a little early to expect a significant recovery in the yuan, but the PBoC's recent actions suggest that the sharp sell-off in the yuan, triggered by policies that curb hot money inflows and unwinding of heavy market positioning, has likely come to an end.

China loosened its grip on the yuan-dollar exchange rate in March this year, widening the daily trading band to 2 percent from 1 percent. That is, in China's foreign exchange spot market, the yuan is now allowed to rise or fall by 2 percent from the central parity rate each trading day, rather than the previous limit of 1 percent.

The central parity rate of the yuan against the U.S. dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each trading day.

Ultimately, the central bank will need to switch to a market-oriented fix, implement a much wider trading ban and introduce broader capital account liberalization, Wang said.


Singapore central bank to provide overnight RMB liquidity facility

SINGAPORE, June 13 (Xinhua) -- The Monetary Authority of Singapore will introduce a facility to provide up to 5 billion renminbi (805 million U.S. dollars) in overnight liquidity to financial institutions in Singapore, it said on Friday.

The move is part of its measures to boost the fast-growing offshore RMB market. Full story

China Focus: More banks participate in cross-border RMB solutions

KUNMING, June 10 (Xinhua) -- Ming Yong, a Chinese construction contractor, knows well the problems of not being able to use yuan in cross-border settlements.

When he completed a project in Myanmar five years ago, he had to bring over 300 million Myanmar Kyats (about 310,000 U.S. dollars) in cash back home to southwest China' s Yunnan Province, where he hired workers to count the money for days. Full story

China Focus: Exports rebound in May, tough days ahead

BEIJING, June 8 (Xinhua) -- China's exports picked up in May following weak performances in previous months while imports tumbled surprisingly, indicating that securing the trade target remains a struggle.

The General Administration of Customs (GAC) said on Sunday that China's exports rose seven percent year on year to 195 billion U.S. dollars in May. The warming results came after a 0.9 percent increase in April and sharp declines in March and February. Full story

Renminbi clearing bank to open in London

BEIJING, June 2 (Xinhuanet) -- A yuan clearing bank will be officially appointed in the United Kingdom in June, said Mark Boleat, policy chairman for the City of London Corp, in an exclusive interview with China Daily.

"There will be a clearing bank in London. In due course, there will be an announcement," Boleat said on Friday. The news will be an endorsement for London's efforts to become an offshore yuan center. Other European financial centers in the race to become a yuan center include Frankfurt, Paris, Switzerland and Luxembourg. Full story

China lends first foreign-denominated funds under currency swap

BEIJING, May 30 (Xinhua) -- China's central bank on Friday lent 400 million Korean won to support trade settlement financing for Chinese importers of goods from the Republic of Korea (ROK), marking its first use of foreign currency under currency swap agreements.

The small symbolic move, announced by the People's Bank of China (PBOC) on its website, marks a shift in the world's second-largest economy, where policymakers hope enterprises will increase the use of the renminbi and other alternative currencies to the U.S. dollar in trade and investment settlement. Full story

Editor: Lu Hui
Related News
Home >> In-depth            
Most Popular English Forum  
Top News  >>
Photos  >>
Video  >>
Top In-Depth News Latest News  
  Special Reports  >>