Yuan firms as dollar slips, PBOC rejects undervaluation claims amid EU talks
SHANGHAI: The yuan firmed against the US dollar on Friday as the greenback retreated from an 18-month high, even as China’s central bank rejected claims the currency is undervalued amid trade talks between Beijing and the European Union. The People’s Bank of China on Thursday pushed back against foreign criticism of its exchange-rate policy, saying it has never pursued competitive depreciation,…
Shanghai witnessed the Chinese yuan gaining strength against the US dollar on Friday, as the greenback retreated from an 18-month peak. Amid ongoing trade talks between China and the European Union, the People's Bank of China (PBOC) denied accusations that the currency is undervalued. The central bank insisted it has never aimed for competitive depreciation, responding to European calls for a stronger yuan to help reduce China's massive trade surplus and export boom.
The PBOC's stance, as outlined in a note by analysts at Commerzbank, suggests Beijing is positioning its narrative ahead of any potential demands for exchange rate adjustments. By presenting its arguments before a series of international policy meetings, China aims to shift the conversation from currency undervaluation towards structural drivers of global imbalances, according to Tommy Xie, head of Greater China Research at OCBC.
Despite the dollar's strength, the yuan has appreciated by 4.4% this year and nearly 9% against the greenback since late 2024, following a seven-quarter streak of upward movement. This trend has been driven by robust exports and measures aimed at attracting foreign investment. Xie believes Beijing is likely to accept measured gains in the Chinese currency, provided they are supported by market fundamentals, while opposing excessive volatility.
Earlier in the trading session, the PBOC set the midpoint rate of the yuan at 6.7330 per dollar, marking its strongest level since February 2, 2023, and 357 pips lower than a Reuters estimate. The yuan is permitted to trade within a 2% range of the fixed midpoint rate daily. The dollar experienced a decline on Friday due to a rise in euro zone bond yields, while expectations for the Federal Reserve's interest rate path in 2024 stayed relatively unchanged.
The dollar index, which measures the greenback against six currencies, fell by 0.088% to 102.03. The offshore yuan closed at 6.6986 per dollar, up around 0.07% in Asian trading hours.
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