Yuan rides QE3 to trading high against the U.S. dollar
Chinese currency reaches levels not seen in nearly two decades, spurred on by speculation of policy easing by Beijing
The yuan rose to its highest level in nearly two decades in intraday trading yesterday, triggered by the new round of quantitative easing in the US and speculation that Beijing could push for more policies to counter an economic slowdown after the once-in-a-decade leadership transition.
The US dollar/yuan spot rate closed at 6.2862 in Shanghai, after hitting 6.2812 earlier in the day, according to the China Foreign Exchange Trade System. It was the yuan's highest value since it traded at 5.8245 on December 27, 1993, before the central bank unified market and official exchange rates.
Markets opened for the first day on the mainland yesterday after the week-long national holiday. They also responded to earlier news that the 18th Party Congress would be held on November 8, which stirred speculation that certain policies would be put into place to revive the weakening economy after the country's leadership transition.
"Now that there is more clarity on the date [of the transition], there could be more easing measures coming out. But for us to see a more sustained appreciation [of the yuan], we would prefer to first see the underlying economic indicators start to pick up," HSBC Asian foreign exchange strategist Dominic Bunning said.
Bunning said the US quantitative easing had also put downward pressure on the US dollar.
