Beijing said able to handle strong yuan as China exports boom
CHINA continues to see booming exports, allowing officials to give strongest yuan in two years full rein, reports Bloomberg News
25 November 2020 - 19:00
In November, the People's Bank of China (PBOC) did not limit the yuan's advance, even as it had the longest run of monthly gains in six years.
A rallying yuan isn't hurting Chinese exporters since demand is surging globally, with many goods being produced in China, the central bank said.
Exporter's resilience means China might not need to weaken the yuan after it increased nine per cent in late May. A stronger exchange rate will also allow imports to be cheaper and will boost domestic consumption, which President Xi Jinping hopes to achieve in his push toward a self-reliant economy.
'The PBOC is allowing the yuan to follow market demand and supply forces because they are well aligned with China's strong fundamentals,' said Credit Agricole analyst Dariusz Kowalczyk.
Most cite the Chinese exporters as being resilient since they're receiving more orders of protective equipment and home-work electronic products from foreign buyers as the pandemic spreads.
Other than the exports, the yuan is also affected by China's recovery from the pandemic and capital inflows chasing onshore bonds. The prospect of a Joe Biden win in the US presidential election has also raised the hopes for friendlier China and US ties.
The PBOC is in no rush to slow these gains, as in the past nine sessions, they set its reference rate less than 0.03 per cent away from the average forecasts.
Meanwhile, on October 27, some lenders stopped using a factor used to smooth out volatility when submitting their fixing quotes. Also, the authorities stopped a two-year rule that made it expensive to bet against the yuan.
'Better economic data gives the PBOC more room to let the yuan run hot,' said Informa Globalmarkets foreign exchange analyst Jian Hui Tan.
This news 715 hits received.