Yuan loses ground on dollar appreciation

The yuan has lost about 2 % of its value against the dollar since the end of October. At the same time, the dollar index (DXY) has strengthened by over 3 %. The yuan has appreciated nearly 2 % against the euro, and its trade-weighted effective exchange rate has strengthened by 1 %. The People’s Bank of China seems to tolerate a more volatile dollar exchange rate and put more weight on yuan’s stability relative to a multi-currency basket. The markets appear to have no difficulties to live with the current situation as there have been no major reactions from the interbank or equity markets. The exchange-rate difference between mainland China and Hong Kong has also remained relatively small.

Yuan-dollar and yuan-euro exchange rates

Sources: Reuters, ECB.