China’s yuan surged on Friday, set for its biggest weekly gain in 12 years, as a slide in the US dollar triggered repatriation of funds back to the mainland by real money investors. Hong Kong’s dollar climbed in tandem with the yuan.
Onshore yuan rose 0.82 per cent, breaking a key 6.45 resistance level to 6.4398 per dollar, which is its strongest since December 2015. It is poised for a weekly gain of 1.82 per cent, the biggest increase since July 2005. Offshore yuan advanced 0.42 per cent to 6.4590 per dollar, also the highest since December 2015.
“The offshore yuan market is crazy today, and we are really heading into unchartered territory,” said Stephen Innes, head of trading Asia Pacific at Oanda. “Real money is likely being repatriated back into China, and the central bank is not stepping in to stop this.”
Real money refers to actual cash being traded by investors, as opposed to money borrowed by the likes of hedge funds to speculate in the market.