The yuan’s rally gathered pace on Thursday, with the Chinese currency rising to its strongest level since March 2016 against a basket of trading partners.
The yuan rose 0.22% versus a group of 24 exchange rates to 97.9819, surpassing its previous peak from 2018, according to data compiled by Bloomberg. Against the dollar, the Chinese currency was up 0.2% to 6.3795 at 3:05 p.m. local time.
It’s turning into a blockbuster year for the yuan as authorities grow comfortable with the currency’s strength, suggesting more appreciation is likely. The People’s Bank of China has been neutral in setting its daily reference rate this week, tracking moves in the market rather than using it to limit appreciation. The Securities Times newspaper said in a front-page commentary on Thursday the central bank has exited regular interventions in the exchange rate and is more tolerant about currency fluctuations.
While the gains are attracting inflows into the nation’s stock and bond markets, raising the risk of asset bubbles, a stronger yuan will dent the impact of higher imported commodity prices. Adding to optimism Thursday was the first official conversation between Beijing and the Biden administration’s trade chief.