Yuan Hits Two-Year High Against Dollar as Greenback Slide Continues
Xu Wei
/SOURCE : Yicai
Yuan Hits Two-Year High Against Dollar as Greenback Slide Continues

(Yicai Global) Jan. 26 -- The yuan 's central parity rate against the dollar rose for the sixth straight day yesterday, reaching its highest point in more than two years. The dollar weakened further before slightly pulling back following US President Trump's supportive remarks. 

The dollar-yuan central parity rate reached 6.3436 yesterday, gaining 288 points from a day earlier, hitting a record high since November 2015. On midday Jan. 25, the offshore dollar-yuan rate exceeded 6.30 at one point, marking a record high since August 2015. It gained about 470 points within the day. The onshore exchange rate rose above 6.31 at one point before closing at 6.3040, another record high. 

"The dollar is going to get stronger and stronger and ultimately I want to see a strong dollar," Trump told CNBC at the Davos Forum in Switzerland. He also said US Treasury Secretary Mnuchin's remarks about trade benefits of a weaker dollar had been misunderstood.

The US dollar index saw a continued decline over the past one month. The accumulative decline has reached over 4 percent, with the index dropping below 90. This is the main reason why the yuan exchange rate is continuously gaining strength recently, said analysts. After significant fluctuation, the exchange rate is expected to return to basic fundamentals, they suggested.

At present, the US Federal Reserve is keeping a close eye on interest rates, while trying to adjust shrinking balance sheet. China still faces downward pressure in economic growth. The yuan exchange rate does not have necessary conditions for continuous sharp appreciation. The future trend of the Chinese currency is more likely to be steady with minor appreciation, analysts pointed out.

In the the short term, there is still room for short-term appreciation of the yuan, considering rigid demand for exchange settlement and exchange purchase offers before the Spring Festival, or Chinese New Year. In 2018, the yuan is expected to maintain a steady momentum against a basket of currencies, and the two-way fluctuation will become regular, analysts predicted.

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Keywords: Yuan , Dollar , CNY , Exchange Rate , Forex