Chinese Yuan Strengthens Against Dollar
By Daisy Joseph
After several weeks of weakening Yuan, the Central Bank of China set the value of the currency at a higher midpoint against the dollar. On Friday, the Yuan gained strength at a much faster pace in a decade. This effort is taken by the Central Bank to support the currency and protect against capital outflows. China is the second largest economy in the world and its currency plays a major role in the forex market.
Yuan was set at 6.8668 from 6.9307. Compared to the previous day, the fixing changed by 0.9%. This was one of the biggest changes encountered by Chinese Yuan since 2005. This has been the highest fixing of the Yuan against the greenback. The central bank of China has decided to allow the Yuan to spot rise or fall within the range of 2% against the dollar. In the onshore and offshore markets, Chinese Yuan continued to weaken and it raised the concerns of the authorities. The regulators have imposed new rules starting from July. The financial institutions must report overseas and domestic transactions exceeding 50,000 Yuan.
Many punters continue to bet on the declining of Yuan. To support the currency, the Chinese foreign exchange regulator has planned to scrutinize foreign currency purchase. This will also affect the supply of Yuan currency in Hong Kong. The strengthening of Yuan has also resulted in the weakening of the dollar as it backed down to 101 against the foreign currency basket.
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