In the late afternoon of trading on Tuesday, the Chinese yuan (CNY) recovered from a low of nearly 15 years versus the dollar (USD) and moved into the black as the mood of investors as a whole improved.
Chinese Yuan on the Move, Bolstered by Uptick in Chinese Stocks
In global trade, the dollar lost ground against the majority of its key rivals, while the demand for the Chinese yuan was sharply boosted by increases in mainland China and Hong Kong stocks.
In afternoon spot trade, the onshore yuan recovered earlier losses, soaring to a high of 7.2577 before settling at 7.2751, up nearly 0.4% on the day.
The People’s Bank of China (PBOC) established the midpoint rate earlier in the session at 7.2081 per dollar, which is the lowest level since January 24, 2008, and is 0.43% lower than the previous fix of 7.1768.
Currency traders interpreted the central bank’s fixing breach of the crucial 7.2 per dollar barrier as a warning that the government was okay with further depreciation.
As a result, the onshore yuan dropped to its lowest level since December 26, 2007, at 7.3280 per dollar, shortly after it opened.
However, as investors assessed the likelihood of a less hawkish Federal Reserve at Wednesday’s monetary policy meeting, those losses were recovered in afternoon trade as the U.S. dollar fell from a one-week high against a basket of global peers.
In recent months, the Fed’s vigorous monetary tightening has bolstered the dollar and U.S. rates, and new information on the rate hike schedule may have an impact on other major currencies.
Separately, following eight consecutive months of outflows, foreign investors started to turn net buyers in China’s onshore yuan-denominated bond market in October, according to a source close to the foreign exchange regulator.
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