Yuan Slightly Higher after Intervention

China’s yuan again dominated moves on major foreign exchange markets on Monday, driven 1 percent higher against the dollar in offshore trade after reports of another round of aggressive intervention by Beijing.

With Chinese stocks sinking a further 5 percent, global financial markets were struggling to shake off the jitters from last week’s fall in the yuan.

The dollar was higher against the euro while the yen hit five-month highs in Asian trade only to retreat after the People’s Bank of China (PBOC) made moves in Hong Kong markets to support the yuan.

The Australian dollar, the main proxy for Chinese sentiment in the G10 list of major developed world currencies, recovered from a four-month low to stand 0.3 percent higher at $0.6977.

“The Chinese authorities clearly want to signal that it will not be a one-way trade in the renminbi,” London-based Rabobank currency strategist Jane Foley said.

“But most people would recognize that were you to take away the interventions it is a currency that would fall.”

The tightly controlled onshore rate for the yuan was around 0.2 percent stronger at 6.5807 per dollar after the PBOC set its daily mid-point rate higher for a second day. Offshore rates strengthened by 1 percent to 6.6180.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza