(Bloomberg) -- China's yuan advanced toward the strongest level since before its devaluation in 2015, shrugging off central bank signals that appreciation should slow.
The onshore yuan rose 0.3 percent to 6.2620 per dollar as of 5:10 p.m. local time, its third day of gains. The currency is at its strongest since Aug. 11, 2015. Wednesday's increase came after the People's Bank of China set the daily reference rate 75 pips weaker than the average estimate in a Bloomberg survey, the biggest discrepancy in four months. A Bloomberg replica of the CFETS RMB Index climbed above 97 for the first time.
The central bank has set the fixing more than 40 pips weaker than estimates three times in the past week, something that hasn't been seen since October. Inflows into China's bond market and confidence over the country's economy have helped drive the yuan up 3.9 percent against the dollar this year, making it Asia's top-performing currency, stoking concern that too fast an appreciation could jeopardize the economy.
“Not only the RMB Index level but the pace of strengthening is worrying, making policy makers jittery about the appreciation risk,” said Ken Cheung, Hong Kong-based currency strategist at Mizuho Bank Ltd. “However, the weaker-than-forecast fixing isn't strong enough to slow down the pace.”
The PBOC said Tuesday it would allow market forces to play a bigger role in the exchange rate, while ensuring the yuan's stability was at a “reasonable” level. The offshore yuan was also stronger Wednesday, rising 0.16 percent to 6.2721 per dollar.
To contact Bloomberg News staff for this story: Helen Sun in Shanghai at hsun30@bloomberg.net.
To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Will Davies, Philip Glamann
©2018 Bloomberg L.P.
With assistance from Helen Sun
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