What’s new: The Chinese yuan hit a 16-month high versus the U.S. dollar on Tuesday, as the world’s second-largest economy recovers from the coronavirus pandemic.
The yuan surged in both offshore and onshore trading. The onshore yuan was trading at 6.7775 per dollar at the end of the daily trading session, while the offshore yuan strengthened to around 6.773 per dollar on Tuesday afternoon Beijing time.
The People’s Bank of China set the yuan’s daily reference rate at 6.8222 to the dollar on Tuesday, the strongest level since May 2019.
What’s the background: The recent appreciation of the Chinese currency against the dollar has been caused by various factors, analysts said, including the Asian country’s economic recovery, the greenback’s general weakness, and a widening spread between the two countries’ interest rates.
Some economists said policymakers could be more tolerant of yuan appreciation than before as better-than-expected exports may ease their concerns about the downsides of appreciation.
The U.S.-China relationship remains a major uncertainty, multiple analysts said, as the yuan is sensitive to trade-related issues and the U.S. presidential election.
Guo Yingzhe contributed to this report.
Related: Yuan Could Remain Strong Against Dollar Until Well Into 2021, Analysts Say
Contact editor Heather Mowbray (heathermowbray@caixin.com)
