Business SinoBeat

Yuan strengthens after three consecutive days of devaluation

The Chinese currency traded stronger at 6.3975 yuan to $US1.0 on Friday, after the central bank’s surprise devaluation that lasted three consecutive days.

The daily reference rate was up from the previous day’s fix 6.4010, and in line with yesterday’s close of 6.3982 yuan.

Since Tuesday, the yuan had fallen 4.4 percent – its biggest drop in value for decades.

yuan currency

A clerk counts 100 Chinese yuan banknotes at a branch of China Merchants Bank in Hefei, Anhui province April 20, 2015. Photo: Reuters/Stringer

Friday’s slight strengthening is in line with central bank assistant governor Zhang Xiaohui’s statement in a Thursday press conference that there would not be a continued depreciation of the currency.

According to some analysts, the devaluation could spark a currency war.

Paul Mackel, head of emerging markets currency strategy at HSBC, said in a Financial Times interview: “The likelihood of the renminbi trading with elevated volatility [against the dollar] implies that other dollar-Asian exchange rates should be more volatile too.”

According to a UK Reuters report, the slide of the yuan has put other Asian economies at a disadvantage and rendered both Indonesia’s rupiah and Malaysia’s ringgit fall to their 17-year lows on Wednesday. In addition, the Australian and New Zealand dollars also fell to six-year lows.

Yuan strengthens after three consecutive days of devaluation