Across The Border | Yuan stabilises but doubts over how long the calm can last

Onshore and offshore yuan stabilised this week after clawing back most of their losses this year but analysts still see volatility ahead despite assurances from the central bank.

The yuan is steady at about 6.50 to the US dollar in both the onshore and offshore markets this week, the strongest level seen in recent months.

The rise of the yuan over the past two weeks was mainly because the US dollar turned weaker against other currencies, said Pheona Tsang, head of fixed income for BEA Union Investment.

“The onshore yuan recently strengthened with the weakening of the US dollar against other trading partner currencies, especially the Japanese yen and euro. This is in line with the new onshore yuan basket system where the currency can both appreciate and depreciate against the US dollar,” she said.

“Since the global currency market remains volatile and moves with expectation of different monetary policies of various central banks, volatility remains in the onshore yuan,” she added.

The strengthening of the yuan also came after People’s Bank of China governor Zhou Xiaochuan last week vowed the yuan would not devalue sharply.