China’s yuan advanced to a 17-year high after the government said on Saturday it plans to expand cross-border use of the currency and improve foreign-exchange management.
The People’s Bank of China set the reference rate for yuan trading at the strongest level since July 2005 after the government told the National People’s Congress it would broaden the avenues of investment for its foreign-exchange reserves, according to documents released in Beijing at the meeting.
“We expect ongoing liberalization and that will include further appreciation,” said Patrick Bennett, a Hong Kong-based strategist at Standard Bank Group Ltd.
The yuan rose as much as 0.09 percent to 6.5628 per US dollar yesterday, the strongest level since China unified official and market exchange rates at the end of 1993. The currency closed at 6.5634 in Shanghai, according to the China Foreign Exchange Trade System.
Twelve-month non--deliverable forwards fell 0.02 percent to 6.4075, reflecting bets the currency will strengthen 2.4 percent in a year from the spot rate, according to data compiled by Bloomberg. The central bank set the reference rate 0.03 percent higher at 6.5651. The currency is allowed to trade up to 0.5 percent on either side of the official rate.
Head of the overseas economic research at the State Council’s Development Research Center, Zhang Xiaoji (張小濟), said that the use of the yuan in international trade still needs some time.
The exchange rate is the closest to “equilibrium” as it has ever been, central bank Deputy Governor Yi Gang (易綱) said on Saturday at the Congress meeting.
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