.Chinese yuan advances to new high against USD Monday
The central parity rate of the yuan strengthened 35 basis points to 6.4997 against the U.S. dollar, breaking the psychologically important 6.5 barrier for the first time since May 2016, according to the China Foreign Exchange Trade System.
It is the longest continuous daily rising sequence since 2005.
The adjustment came after a rise of 237 basis points Friday and 42 basis points Thursday. The rate fell below 6.6 on Sept. 1, the first time since June last year.
In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2 percent from the central parity rate each trading day.
The central parity rate of the yuan against the U.S. dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.
The yuan has appreciated by 6 percent in cumulative terms against the dollar since the beginning of the year due to the weakening greenback and steady expansion of the Chinese economy.
The dollar index against a basket of six major currencies was 0.2 percent higher at 91.524 Monday after skidding to a two year low of 91.011 Friday.
"The appreciation of the RMB against the U.S. dollar this year has been driven by a combination of U.S. dollar weakness, China's tighter management of capital outflows, reduced risk of large scale U.S.-China trade war, and improved economic performance and market sentiment on China," said UBS economist Wang Tao in a research note.
China's economy expanded 6.9 percent in the first half, well above the target of around 6.5 percent for the year.
Its manufacturing activity expanded for the 13th consecutive month in August, providing fresh evidence of a firming economy.
China's forex reserves rose for the seventh month in a row in August to 3.092 trillion U.S. dollars, increasing 10.8 billion dollars from a month earlier.
While recent weakness of the U.S. dollar and market sentiment have strengthened the yuan, Xie Yaxuan with China Merchants Securities saw little possibility for the yuan's continued rally.
"From a medium-term perspective, the yuan will not go through a unilateral rally, and the yuan-dollar exchange rate will probably achieve two-way fluctuations with improving flexibility," Xie said.
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