The Chinese yuan is set to continue making gains against the US dollar over the coming months, as China’s central bank sets strong daily reference rates for the currency and traders bet on possible US interest rate cuts, analysts said.
On Monday, the central bank set the daily reference rate just below that year-high peak, at 7.1072 per US dollar.
“We see the unusual appreciation bias in the PBOC’s daily fixing as a policy push to guide the yuan gradually stronger,” Goldman Sachs analysts said in a research note on Monday.
The analysts noted that historically, China’s central bank had tended to set the rate weaker than spot when the dollar was strong and the yuan faced depreciation pressure – a pattern not seen in recent market moves.
“This pre-emptive move by the PBOC should help the yuan catch up with peers and reduce the risk of a sharp appreciation later,” the note added.
In August, the offshore yuan rose by 1.21 per cent against the dollar and was trading at 7.1279 per US dollar as of Monday noon.
