Chinese Yuan hits two-year high as dollar stutters amid US shutdown
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BEIJING: The Chinese yuan’s central parity rate hit its highest level against the US dollar since December 2015 on Monday, with impressive 2017 economic data leaving Beijing buoyant while the White House treads water amid the ongoing government shutdown.
The central parity rate – based on a weighted average of prices offered by market makers before the opening of the interbank market each business day – stood at 6.4112 on Monday, an increase of 57 basis points, according to China Global Television Network (CGTN) on Monday.
This marks the highest central parity rate since December 8, 2015, and followed an increase of 243 basis points on Friday.
According to Liu Jian, a researcher with the Bank of Communications, said “the yuan's robust performance was the result of a weaker dollar, sound economic fundamentals, improved regulation of capital flows and increased global use of the currency.”
Official figures released last week showed that China’s GDP in 2017 grew by 6.9 percent, its first growth increase in seven years.
Efforts to restrict capital outflows in 2017 saw Beijing’s forex reserves grow for the first time in two years, reaching 129.4 billion US dollars.
The US government shutdown, which began at midnight on Friday, has already knocked markets and the US dollar.
The foreign exchange market on Monday saw the dollar’s value against a basket of other currencies drop by around 0.2 percent to 90.465. This saw it edge closer to the three-year low reached last Wednesday, as speculation mounted that the shutdown loomed overhead.
According to media report, a short-term US government shutdown should only have a minimal economic effect, but a prolonged shutdown could knock investor confidence in American assets.
The last government shutdown in 2013 lasted 16 days, and saw two billion US dollars’ worth of productivity lost. S&P reported that by the end of that shutdown, the entire economy had lost 24 billion US dollars.
