SHANGHAI: The Chinese yuan jumped against the dollar on Friday to its highest since its 2005 landmark revaluation after China's central bank appeared to condone the climb by setting its reference rate sharply higher.
The yuan climbed as far as 6.7700 to the dollar within minutes after the start of trade, up 0.16 percent from Thursday's close of 6.7810.
The yuan's intraday high surpassed the Friday reference rate against the dollar of 6.7720, the highest set by the Chinese central bank since the 2005 revaluation.
But against the euro, which had rallied overnight by three cents on a bout of short-covering, the Chinese central bank set the yuan's reference rate markedly lower at 8.4741, down 2.2 percent from Thursday's rate.
The settings of the reference rates against the dollar and the euro suggested that China's central bank was giving significant weight to overnight movements in the euro in managing the yuan's overall value.
"The market was surprised that the yuan's reference rate against the dollar was so high. Perhaps that was because of the rise in the euro," said a yuan trader at a European bank in Shanghai.
That would indicate a change in the way the Chinese central bank manages the yuan. In the past, the yuan had always tracked the dollar very closely even though the central bank said it was managed against a basket of currencies.
In early Friday trade, the yuan fell against the euro in line with the sharp drop in the reference rate. It traded at 8.4777, down from Thursday's close of 8.4333.
China's central bank manages the yuan's daily movements by setting a series of reference rates every day before the start of trade. Against the dollar, the yuan can rise or fall 0.5 percent each day from its reference rate, also known in the market as the mid-point.
Against other currencies, including the euro, the yuan can move 3.0 percent. - Reuters
The yuan climbed as far as 6.7700 to the dollar within minutes after the start of trade, up 0.16 percent from Thursday's close of 6.7810.
The yuan's intraday high surpassed the Friday reference rate against the dollar of 6.7720, the highest set by the Chinese central bank since the 2005 revaluation.
But against the euro, which had rallied overnight by three cents on a bout of short-covering, the Chinese central bank set the yuan's reference rate markedly lower at 8.4741, down 2.2 percent from Thursday's rate.
The settings of the reference rates against the dollar and the euro suggested that China's central bank was giving significant weight to overnight movements in the euro in managing the yuan's overall value.
"The market was surprised that the yuan's reference rate against the dollar was so high. Perhaps that was because of the rise in the euro," said a yuan trader at a European bank in Shanghai.
That would indicate a change in the way the Chinese central bank manages the yuan. In the past, the yuan had always tracked the dollar very closely even though the central bank said it was managed against a basket of currencies.
In early Friday trade, the yuan fell against the euro in line with the sharp drop in the reference rate. It traded at 8.4777, down from Thursday's close of 8.4333.
China's central bank manages the yuan's daily movements by setting a series of reference rates every day before the start of trade. Against the dollar, the yuan can rise or fall 0.5 percent each day from its reference rate, also known in the market as the mid-point.
Against other currencies, including the euro, the yuan can move 3.0 percent. - Reuters
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