The central parity rate of the Chinese yuan strengthened by 35 basis points or 0.05% to 6.4997 against the US dollar, marking the highest level since May 12, 2016.
The People's Bank of China (PBOC) raised the yuan exchange rate for the 11th session in a row. The central bank allows the exchange rate to rise or fall by 2% against the US dollar from official midpoint rate it sets each trading day.
In March, PBOC Governor Zhou Xiaochuan said that the renminbi’s exchange rate should be relatively stable this year even as rising US interest rates contribute to foreign exchange volatility. He added that the interest rate differential with the US would not lead to persistent speculation and rates would respond to the domestic economy.
On Monday, the Chinese central bank said that it would ease a reserve requirement for financial institutions trading in yuan FX forwards. Analysts said this signals that the PBOC does not want to allow too much appreciation of the yuan against the dollar as a stronger renminbi will benefit the banking sector, real estate and airlines, but will adversely affect exporters.
