Central Parity Rate of Yuan Against Dollar Hits Four-Month Low on Strong Dollar Index
Xu Wei
DATE:  May 29 2018
/ SOURCE:  Yicai
Central Parity Rate of Yuan Against Dollar Hits Four-Month Low on Strong Dollar Index Central Parity Rate of Yuan Against Dollar Hits Four-Month Low on Strong Dollar Index

(Yicai Global) May 29 -- The central parity rate of the yuan against the dollar fell below 6.4 for the first time in about four months as the dollar index remains strong. Analysts believe the yuan is relatively firm and the depreciation at this stage is manageable although the redback lost ground for four consecutive days.

The central parity rate of the yuan dropped to 6.4021 today from yesterday's 6.3962, a depreciation of 59 basis points, according to the China Foreign Exchange Trade System. The offshore yuan hit a record low since late January, reaching 6.4231 per dollar at 5 p.m. today. 

In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2 percent from the central parity rate each trading day.

The dollar index jumped to 94.8500, reaching the highest point since Nov. 14 after US President Donald Trump said yesterday that the two US delegations have respectively arrived in North Korea and Singapore to prepare his planned summit meeting with North Korean leader Kim Jong-un and that the State Department subsequently confirmed that the US and North Korean officials met in Panmunjom, a village in what is called the Demilitarized Zone, DMZ, that runs along the border between North and South Korea.

The central parity rate of the yuan against the dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.

As the greenback recovers from its earlier weakness, the central parity rate of the yuan against the dollar has been adjusted in a much smaller fluctuation range than that of the dollar index, showing considerable resilience, analysts said.

Since April 18, the central parity rate of the yuan against the dollar has declined 1,191 basis points, with a depreciation rate of 1.9 percent, much lower than the dollar index's appreciation rate of 5.7 percent. Therefore, the yuan has performed relatively firm among other main currencies.

The strong performance of the yuan against the dollar shows that the redback can perform relatively firm compared with other main currencies when the dollar index rises, analysts said. This reflects the positive expectation of the market about the yuan, they added.

Editor: Mevlut Katik

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Keywords:   RMB,USD,Forex,Exchange Rate,Market