The People's Bank of China signaled a halt to the yuan's appreciation to a three-year high, setting a central parity rate of 6.7808 yuan per dollar amid pressure on the US dollar.
On August 20, 2569, at 08.49:3 AM, Bloomberg News reported that the People's Bank of China (PBOC) signaled its desire to slow the appreciation of the yuan, after the Chinese currency reached its strongest level against the US dollar in over three years, setting a daily reference rate significantly weaker than market expectations.
The PBOC set the yuan's central parity rate (Yuan Fixing) on Thursday (August 20) at 6.7808 yuan per dollar, slightly stronger than the previous day's level of 6.7854 yuan per dollar.
However, this level was 598 pips lower than the average forecasts of analysts and traders in a Bloomberg survey, with the difference between the PBOC's median and market estimates being the widest since February.
This move reflects that, while the PBOC allows the yuan to appreciate, the central bank does not want to see it appreciate too rapidly, using the daily central parity rate mechanism as a tool to signal to the market.
The PBOC's signal came after the offshore yuan strengthened overnight, reaching its highest level since February 2023, or in over three years.
The yuan and several other Asian currencies have recently been supported as investors reduced their betting on further interest rate hikes by the U.S. Federal Reserve (Fed), leading to renewed selling pressure on the dollar.
Pressure on the dollar increased further after the U.S. Treasury Department announced plans to increase its repurchase agreements of long-term government bonds, which led to a decline in U.S. bond yields and supported Asian currencies.
Wee Koon Chong, Senior Market Strategist for Asia Pacific at BNY in Hong Kong, said he remains positive on the yuan in the medium term but expects the rate of appreciation to slow down.
He stated that the slowdown in the Chinese economy, the continued outflow of investment portfolios, and the increasing demand for hedging against exchange rate fluctuations are becoming factors putting more pressure on the yuan.
However, China's high current account surplus remains a key fundamental factor supporting the yuan in the medium term.
Reference: bloomberg.com
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