Truce in Sino-US trade dispute has boosted yuan: commentary
06 December, 2018
President Xi Jinping’s bold efforts at the G20 summit and the subsequent Sino-US trade dispute truce has directly boosted the yuan exchange rate and foreign investor confidence in the Chinese market, Securities Daily said in a commentary on Thursday.
Economic and trade teams from China and the US are actively promoting consultations in accordance with a clear timetable and road map, according to a spokesman from the Ministry of Commerce. The easing of tensions laid the foundation for the yuan to return to its true value, the report said.
Meanwhile, as the Fed is expected to take a slower pace in interest rate hikes, risk aversion has also declined. And though China’s economy is facing downward pressure, policies to ease the pressure are taking effect. These factors have also encouraged foreign investors to increase yuan assets.
Also, the central bank has moved to halt efforts to short the yuan. The People’s Bank of China issued offshore bills in Hong Kong to drain liquidity, which increased the cost of borrowing the yuan overseas and made short-selling unprofitable.
Over the last two trading days, the central parity of the yuan against the US dollar increased by 955 basis points, while the appreciation was close to 1.4%.