Offshore trade boosts Chinese yuan against the dollar

Economy - Mohit Shah - Jan 05,2017

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offshore trade boosts chinese yuan against the dollar

 

On Thursday, Chinese yuan scaled upwards at its fastest rate against the U.S. dollar due to improved offshore trade.

The escalated value of Chinese yuan came as a relief as the currency is currently bothered by concerns related to capital outflow.

According to reports on Thursday, dollar was acquiring as little as 6.8071 yuan in intraday, offshore trade, counted to be the pair’s lowest since November. Moreover, the dollar/yuan pair on Wednesday had its biggest drop in a year considering the offshore market; the fall was at its highest from 6.9688, along with its lowest at 6.8658.

This directly reflected the move from the People’s Bank of China (PBOC) to fix its yuan mid-point at 6.9307 counter to the dollar, down from 6.9526 as noted on Wednesday.

It was clearly analyzed that, the difference between the onshore and offshore trade on Thursday was quite stark. Onshore, the dollar was grabbing 6.8952 yuan.

According to analysts, the offshore yuan's move was also boosted by mainland policymakers' possible efforts to toughen capital controls.

Initiating from January 1, China’s foreign-exchange regulator has planned to step up inquiry on foreign-currency purchases. Moreover, Chinese regulators introduced fresh rules that will be imposed in the month of July. It requires financial institutions on the mainland to present domestic and overseas cash transactions listed more than 50,000 yuan ($7,217); the previous limit was set at 200,000 yuan.

The mainland's currency has currently become a political tension with the United States. President-elect Trump stressing during his campaign to tag the country as a currency manipulator for purposes such as competitive trade advantage and warning to impose a 45 percent tariff on Chinese exports to the U.S.

Geoff Lewis, global market strategist at Manulife Asset Management, expects the yuan to fall around 4-5 percent against the dollar in the current year, a much slower depreciation pace as compared to nearly 7 percent in 2016.