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Yuan steady after strong rise against the dollar
August 12, 2014, 9:30 pm

The yuan devalued slightly against the US dollar earlier in the year after the central bank started to implement financial reforms [Xinhua]

The yuan devalued slightly against the US dollar earlier in the year after the central bank started to implement financial reforms [Xinhua]


The Chinese yuan held somewhat steady in its central parity against the dollar late on Tuesday after a seven-day hike.

The upward trend has pushed the increasingly popular currency to its highest level since March 2014.

According to the China Foreign Exchange Trading System, the central parity rate is based on a weighted average of prices offered by market makers.

At the end of trading on Tuesday, the yuan fell slightly to 6.158 after briefly hitting 6.14 on Monday. The People’s Bank of China held the mid-point trading rate at 6.1517.

In late May, the yuan hit an 8-month low of 1.1699 against the dollar.

China’s Central Bank has enacted restrictions which allow the yuan the flexibility to rise or fall by 2 per cent from the central parity rate each trading day.

Beijing is keen on substituting the US dollar with the yuan in all of China’s trade with other countries. The Chinese currency now trades directly with the Japanese yen, the Australian dollar, the Brazilian real, the EU’s euro, the New Zealand dollar and many other currencies.

In June, the UK government agreed to establish a yuan-clearing bank in London that would “act as a signal for London’s growing yuan activities”.

China and the UK had signed an agreement last year to establish a reciprocal 3-year sterling/renminbi (RMB, or Chinese yuan) currency swap line.

China has also signed an agreement with Germany to work on appointing a clearing bank in Frankfurt.

In March, Philip Lowe, the Deputy Governor of the Reserve Bank of Australia (RBA), told delegates at the Centre for International Finance and Regulation (CIFR) conference in Sydney that the internationalization of China’s currency could eventually transform global capital markets.

He added that while China’s transition to a more flexible exchange rate will be gradual, it nevertheless carries with it the “potential to create a seismic shift in the international monetary and financial landscape”.

Source: Agencies

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