Yuan gets its biggest boost in a decade

04 Nov '15

2 min read

China raised the daily reference rate for its yuan currency by the largest margin in a decade on Monday, according to media reports quoting an official statement. It comes just three months after a surprise devaluation sent shockwaves through global markets.

The central People's Bank of China adjusted the central rate of the yuan upwards by 0.54 per cent against the US dollar, the statement said.

The increase was the largest since 2005 when Beijing unpegged the yuan from the dollar and has raised hopes that the world's second largest economy could be arresting a slow growth.

Analysts attributed the move to improved sentiment towards the world's second largest economy as well as an impending decision by the International Monetary Fund on whether to include the yuan in its internal “special drawing rights” (SDR) reserve currency basket.

China now allows the currency to trade up or down two percent from the centrally set daily rate on the domestic foreign exchange market.

Authorities moved the yuan almost five per cent lower through the daily fix in one week in August, saying it was part of broader reforms aimed at shifting towards a more flexible exchange rate.

China wants to promote the yuan as a global reserve currency alongside the dollar, an ambition that depends on its willingness and ability to loosen tight restrictions on its trade.

But authorities fear that losing control of the yuan's value will mean giving up a powerful tool for managing the economy, which last quarter experienced its slowest growth in six years at 6.9 per cent. (SH)

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