Yuan strengthens past 7 per US$ for first time since May 2023
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The PBOC will also cut the seven-day reverse repo rate, its new benchmark, by 0.2 percentage points to 1.5 per cent, as well as other interest rates.
PHOTO: EPA-EFE
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BEIJING - The yuan rallied past the 7 per US dollar milestone for the first time since May 2023 as investors digested a raft of measures to support the Chinese economy and the recent Federal Reserve rate cut kept the dollar on the back foot.
The offshore yuan rose as high as 6.9951 per US dollar on Sept 25, after China unleashed a blitz of policy support measures amid concerns over its growth target.
The People’s Bank of China (PBOC) on Sept 24 announced plans to lower borrowing costs and inject more funds into the economy, as well as to ease households’ mortgage repayment burden.
PBOC governor Pan Gongsheng said the central bank will, in the near future, cut the amount of cash that banks must hold as reserves, freeing up about one trillion yuan (S$183 billion) for new lending.
The PBOC will also cut the seven-day reverse repo rate, its new benchmark, by 0.2 percentage points to 1.5 per cent, as well as other interest rates.
The property market support package included a reduction of 50 basis points on average interest rates for existing mortgages, and a cut in the minimum down payment requirement to 15 per cent on all types of homes, among other measures.
The currency had already been rallying this quarter as expectations that the Fed will further loosen its policy after delivering a half-percentage-point rate cut kept the dollar near the lowest level since January.
Yuan gains could extend if greenback weakness drives Chinese exporters to repatriate some of their large dollar holdings into the local currency. Capital flows into the country have already improved in August, as local firms registered net sales of foreign exchange at banks for the first time in 14 months. BLOOMBERG
