(Yicai Global) Sept. 1 -- The central parity rate of the yuan (CNY) against the US dollar (USD) declined 101 basis points before the opening of interbank market on Friday. This represents the strongest level the yuan hit against the dollar in more than 14 months.
The China Foreign Exchange Trade System (CFETS), the interbank trading and foreign exchange division of China's central bank, the People's Bank of China (PBOC), set the yuan central parity rate at 6.5909 against the dollar on Friday, compared with the official close of 6.5969 yesterday.
Both onshore(CNY) and offshore(CNH) yuan broke the threshold of 6.59 yesterday, and the former closed at 6.5889 in the night trading.
The value of the yuan against the dollar is expected to further strengthen this month and the steady appreciation of the yuan may lead to a rise in exchange settlement of enterprises. The stable increase in trade surplus, to some extent, also contributed to the improvement of foreign exchange reserves of PBOC, China's central bank, Lian Ping, the chief economist at the Bank of Communications Co. [SHA:601328; HKG:3328], was quoted by the Securities Daily as saying.
Funds outstanding for foreign exchange is expected to increase by about CNY20 billion (USD3 billion) in August, Lian Ping added. Funds outstanding for foreign exchange is the amount in yuan the PBOC pays financial institutions, including commercial banks, each month in exchange for the foreign currencies they receive from trade surpluses, foreign investments and other sources.
Overnight, the dollar came under pressure yesterday after data showed the pace of inflation remained subdued. The dollar index fell 0.2 percent in August for the sixth consecutive month.
The US Department of Labor will issue US non-farm payrolls for last month later today, which is likely to determine the Fed's final decision on shrinking balance sheet in two weeks. The level of job and wage growth will be another consideration for the Federal Reserve to decide whether to raise interest rates at the end of the year.