The CNY rose against the USD Friday morning to a fresh high under the current system, after the People’s Bank of China ended the year with a bullish reference exchange rate for its currency. In the onshore over-the-counter market, the USD fell to as low as CNY6.3070, its weakest intraday level against the yuan since the 1980s, before Beijing allowed its currency to be regularly traded as part of China’s market-oriented reforms.
At 0222 GMT, the USD had recovered slightly to CNY6.3112, down from CNY6.3192 late Thursday.
Friday’s dollar-yuan central parity rate of 6.3009, down from the previous low of 6.3146 Wednesday and well below market expectations, translates to a 5.1% rise in the yuan midpoint over 2011. The yuan is up around 4.5% in actual trading against the dollar. The PBOC’s aggressive guidance Friday likely reflects a largely political objective to show 5% appreciation in the Chinese currency over the past year.
China has been under significant pressure from the U.S. to speed up raising the yuan exchange rate, even as capital outflows have since September repeatedly dragged the Chinese currency to the bottom of its permitted daily trading range.
On Tuesday, however, the Obama administration again declined to label China a currency manipulator in a Treasury semiannual report. A country designated as such is one that uses its exchange rate to gain unfair competitive advantage.
The dollar-yuan fixing is the daily midpoint around which the spot rate is allowed to trade up or down by as much as 0.5%.
EasyForexNews Research Team