China's yuan hits 2016 high on strong fixing, global US dollar weakness

China's onshore yuan on Friday (March 11) hit its strongest level against the US dollar in 2016.
China's onshore yuan on Friday (March 11) hit its strongest level against the US dollar in 2016. PHOTO: AFP

SHANGHAI (REUTERS) - China's onshore yuan on Friday (March 11) hit its strongest level against the US dollar in 2016, buoyed by the central bank's firmest midpoint this year and the greenback's slide after the European Central Bank suggested it was done cutting rates for now.

Offshore yuan strengthened 0.3 per cent from Thursday to hit its highest level since early December at 6.4733 just before midday.

The onshore yuan hit 6.4866 in late morning trade, its highest level since Dec. 29. Its previous 2016 peak was 6.4880, on Feb 15.

The yuan trimmed some gains to stand at 6.4892 at midday, 0.28 per cent firmer than the previous close. Friday's volume was low.

If the yuan closes around the midday level, it would have strengthened 0.2 per cent this week, largely due to Friday's gain.

Prior to Friday's market opening, the People's Bank of China set the midpoint rate at 6.4905 per dollar, or 0.34 per cent stronger than the previous fix of 6.5127.

"You could see how determined the central bank is to keep the currency stable within a floating range of merely a few dozens of pips," said a trader at a Chinese commercial bank in Shanghai.

The dollar index against a basket of currencies dropped 1.1 per cent overnight after comments by ECB President Mario Draghi suggesting an end to easing steps, although it rebounded 0.2 per cent around in Asia by midday Friday.

The greenback's weakness should ease any pressure on the yuan to depreciate in the near future, traders said.

The offshore yuan was trading 0.03 per cent stronger than the onshore spot at 6.4873 per dollar by midday.

The yuan had eased 1.4 per cent against the euro by midday at 7.2453. It strengthened 0.4 per cent against the Japanese yen, hovering at 5.7213 to 100 yen.