The People's Bank of China keeps experimenting with the national currency. This time, the regulator chose to increase the yuan against the US dollar rate to its 3-year high.
The central bank’s comments about its decision were brief and uninformed. But local financial periodicals did not miss a chance to interpret its actions. Thus, the combination of internal and external factors is named one of the primary reasons for a stronger yuan. Specifically, the US dollar index, key economic indicators, and the state of China’s foreign trade may lead to an increase in the exchange rate of the renminbi against the greenback in the short term. The yuan is also believed to rise to 6.3-6.2 per dollar and preserve its bidirectional volatility in the long term.
When there can still be doubts about the yuan’s exchange rate, there are no in terms of bidirectional volatility. Early this year, head of the PBOC’s monetary policy department Sun Guofeng declared that two-way yuan rate fluctuations would become the new norm. The senior Chinese official also added that the renminbi would depend on the internal and external economic situation, China’s balance of payment, and changes in the global forex market. Moreover, China is intended to keep the national currency stable at a reasonable and balanced level.
