Chinese yuan strengthens to new high against US dollar

BEIJING - The central parity rate of the Chinese currency, the renminbi or the yuan, advanced to a new high against the US dollar Thursday on persistent weakening of the US dollar.

The Chinese yuan strengthened 294 basis points to 6.3045 against the US dollar Thursday, the strongest level since Aug 11, 2015, according to the China Foreign Exchange Trade System.

The first month of 2018 saw the yuan's onshore exchange rate strengthen by 3.38 percent against the US dollar, the biggest monthly gain since 1994.

The reading was also more than half of the 6.72 percent gain for all of 2017, the sharpest annual appreciation in nine years.

The dollar index, a gauge that measures the US currency's strength against six other major currencies, has declined over 5 percent since December last year.

The tapering of monetary accommodation at major central banks and the expectation of rate hikes abroad are behind the weak dollar, according to Shenwan Hongyuan Securities.

Sound economic fundamentals, improved corporate profits and increased global use of the currency also support the yuan's value, said Liang Hong, chief economist of the China International Capital Corporation (CICC).

China's economy expanded 6.9 percent last year, picking up for the first time in seven years and well above the government's annual target of around 6.5 percent.

The International Monetary Fund has raised its forecast for China's economic growth in 2018, expecting China's GDP growth to stand at 6.6 percent this year, up from the 6.5 percent prediction made last October.

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 US dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.