Yuan slide reverses on buoyant GDP

The yuan strengthened against the dollar on Wednesday to its highest level in 10 months, reversing its depreciation trend.

On Wednesday, the pair closed at 6.68 versus 6.70 on Tuesday. On Jan 2, the first trading day of the year, it was at 6.94.

Better-than-expected economic recovery and efforts to open up the domestic capital market to foreign investors will probably push the yuan further up against the dollar in the short term, experts said.

Many institutions have revised upward their predictions for the yuan by the yearend. For instance, Morgan Stanley revised its end-2017 forecast for the yuan to 6.90 per dollar from the previous 7.10.

"Based on its recent performance, the yuan has made a switch from its previous depreciation path," said Cheng Shi, chief economist at ICBC International.

Cheng said more market-people are upbeat about the yuan now, leading to growing interest in holding yuan-denominated assets.

This year, the yuan has gained against the dollar by more than 4 percent as of Wednesday, a stark contrast to around the 6.5-percent depreciation last year.

A weak dollar has helped push the yuan up amid uncertainty over the Trump administration's fiscal agenda. This has caused a dollar sell-off, according to Li Liuyang, a forex analyst with China Merchants Securities.

After the first-half GDP growth - 6.9 percent - sprang a pleasant surprise, the market's confidence in the Chinese currency has been restored.

Government efforts for a stable balance of payments will likely exert long-term positive pressure on the currency exchange rate fluctuations, according to Liu Ligang, an economist with Citibank.

The mainland-Hong Kong bond connect platform is expected to attract around 3 to 5 trillion yuan ($441-735 billion) in the next couple of years, according to Cheng of ICBC International.

wangyanfei@chinadaily.com.cn