The rally in the yuan accelerated on Thursday, with the Chinese currency reaching its highest level since March 2016 against a basket of trading partners.
The yuan rose 0.22% against a group of 24 exchange rates to 97.9819, surpassing its previous high in 2018, according to data compiled by Bloomberg. Against the dollar, the Chinese currency is up 0.2% to 6.3795 at 3:05 p.m. local time.
This turns into a successful year for the yuan as authorities feel comfortable with the currency’s strength, suggesting that further appreciation is likely. The People’s Bank of China has been neutral in setting its daily benchmark rate this week, tracking market movements rather than using it to limit appreciation. The Securities Times newspaper said in a front-page comment on Thursday that the central bank had stopped regularly intervening on the exchange rate and was more tolerant of currency fluctuations.
Get ready for a wilder, freer yuan: what to watch in China
As the gains attract inflows into the country’s stock and bond markets, increasing the risk of asset bubbles, a stronger yuan will reduce the impact of rising imported commodity prices. Adding to the optimism Thursday was the first official conversation between Beijing and administration trade chief Biden.