MW: China central bank guides yuan higher as economy slows
China’s central bank guided the yuan to its strongest level in three months as Beijing seeks to stem outflows and keep the tightly controlled currency buoyant just as the economy suffers a bruising slowdown.
A gauge of factory activity is at its lowest in a year, growth has fallen to its slowest since the global financial crisis and signs of distress are growing in China’s bond markets.
“Soft Chinese economic data and reports this week of bond payment defaults might, if occurring in another economy, be considered ample reason to sell the currency,” Patrick Bennett, strategist at CIBC World Markets wrote in a note to clients. “As is often the case, with China it is different.”
The People’s Bank of China on Friday set the daily reference rate at its strongest level against the U.S. dollar since mid-January this year. The yuan USDCNY, -0.05% is allowed to trade 2% above or below that level.
After setting it at its weakest level for the year last month, authorities have reversed course and have slowly been pushing it stronger since then. The yuan is now up 0.4% for the year, erasing part of last year’s 2.47% loss.
