China has raised the exchange rate for its currency, the yuan by 0.56% against the US dollar, from the previous day
The central bank – People’s Bank of China (PBOC) – fixed the yuan rate at 6.4589 to the US dollar on Friday.
That is the biggest increase in nearly 11 years.
China only allows the yuan to rise or fall 2% on either side of the PBOC’s daily fix, to avoid volatility and maintain control over the Chinese currency.
Analysts have pointed out the move is not a reflection of future yuan policies.
Some have argued the PBOC’s move is a knee-jerk reaction to US dollar weakness overnight. The US dollar had fallen sharply against the yen after the Bank of Japan surprised markets and decided against any extra monetary easing.
“The expectation for a stronger yuan fix was laid by the gains for the yen after the Bank of Japan announcement,” said Patrick Bennett, a strategist at Canadian Imperial Bank of Commerce in Hong Kong. Read more