Yuan Rate Hits Record, Fueling Asian Currencies
China’s central bank fixed the yuan’s exchange rate at a record against the dollar Wednesday, setting the tone for a broad rise in Asian currencies as authorities aim to quell rising inflation pressures.
Central banks in South Korea and Malaysia were again selling their currencies for dollars to keep them from rising too quickly, traders said, showing authorities are taking care not to damage their export industries crucial to the region’s economic growth.
Hours after raising interest rates to cool the economy, the People’s Bank of China set its parity rate for the dollar at 6.5850 yuan, down from the Feb. 1 close of 6.5938 yuan in the over-the-counter market and that day’s fixing rate of 6.5860 yuan. China’s markets reopened Wednesday after being closed since last week for Lunar New Year holidays, and the currency ended over-the-counter trading unchanged from the Feb. 1 level.
China’s currency is now up 3.7% since the PBOC ended the yuan’s two-year peg to the dollar in mid-June. Trading in yuan derivatives offshore show investors now expect the dollar to fall to 6.4270/6.430 yuan in the coming year, compared with the 6.4493/6.4728 yuan implied by one-year nondeliverable forwards before the Lunar New Year holidays.