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China strengthens Yuan to drive consumption

Bloomberg
Bloomberg9/4/2020 10:34 AM GMT+08  • 3 min read
China strengthens Yuan to drive consumption
The currency’s rally since this year’s nadir in late May has made it one of the best performers in Asia, with the buying momentum still standing close to the strongest since January.
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Beijing is allowing faster gains in the yuan as it seeks to cheapen imports and bolster weak consumer spending.

That’s one theory touted by DBS Bank Ltd. and Mizuho Bank Ltd., who say a stronger yuan is ideal for Beijing at a time when Chinese President Xi Jinping is pushing for a more self-reliant economy. That marks a shift from when officials worried that a strong yuan would undercut the nation’s exports to the world.

The daily currency fixings show China’s equanimity toward accelerating gains in the yuan, with the central bank refraining from sending clear warning signals to traders. That’s even as the yuan gained nearly 5% since late May versus the dollar to its highest level in more than a year. The fixings -- - a tool the PBOC often uses to limit currency strength -- have generally been tracking the market higher as the dollar has weakened.

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