(Yicai Global) March 3 -- The Chinese yuan strengthened by 335 basis points against the US dollar today from yesterday in the biggest day-to-day appreciation since July 30 last year.

The central parity rate of the Chinese yuan to the US dollar stood at 6.3016, up from 6.3351 yesterday, according to the latest exchange rate data. The onshore yuan rate strengthened to 6.3190 from 6.3210 as of 11.15 a.m. China time, while that of the offshore yuan was at 6.3231, basically the same as the time of closing yesterday.

The yuan index has been going against the dollar index since the second half of last year, said Lu Zhengwei, chief economist at Industrial Bank. The yuan remains resilient despite heightened expectations that the US Federal Reserve will tighten monetary policies this year. This reflects the significant change in greenback supply and demand in China in the post-pandemic era, he added.

Demand for the US dollar in China has fallen markedly as the country’s imports have been weaker than exports mainly because of the impact of the outbreak on the global supply chain, resulting in less demand for US dollar purchases.

Chinese mergers and acquisitions activity overseas is also declining, further curtailing demand for foreign exchange, mainly because some developed countries have tightened oversight of M&As by companies from other nations, he added.

Overseas funds remain enthusiastic for yuan assets, and there have been huge inflows of foreign capital, Lu said. Unlike other emerging markets as risk assets, yuan assets have gradually shown a safe-haven asset attribute in recent years.

The yuan appreciation reflects China’s strong economic and trade fundamentals, said Tao Jin, deputy director of the Macroeconomy Department at the Suning Institute of Finance.

Amid strong uncertainties in the geopolitical situation, the yuan is still likely to appreciate as risk-averse international investors add yuan assets and amid short-term improvements in foreign trade, Tao said.

China’s economic fundamentals will be good in the long run and this will become the dominant factor to decide the redback trend. The yuan exchange rate will maintain a two-way fluctuation, he added.

Editor: Kim Taylor