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RMB exchange rate propped up by rising spot rate

2014-07-31 GMT+8:00

BEIJING, July 29 (Xinhua) -- The central parity rate of the Chinese yuan against the US dollar has dropped for a fourth straight day on Monday while the spot exchange rate of RMB in the inter-bank forex market hit a fourth month high and topped 6.19.

Analysts say that strengthening US dollar dragged down the yuan's central parity rate but capital inflow on the Hong Kong offshore RMB market pushed up the CNH exchange rate and stabilizing economy ofChinaalso helped increase forex sales willingness on the onshore market.

The central parity rate of the Chinese yuan against the US dollar was set at 6.1622 on Monday, down 25 basis points from Friday. However, on the same day, the spot exchange rate of the yuan against US dollar broke 6.19 at the opening and closed at 6.1863, up 52 basis points from Friday and registering a rise for a fifth consecutive trading day.

The divergent trends between central parity rate and spot exchange rate indicate that the forex market has turned to net sales. Meanwhile, state-own enterprises' cut of forex purchases, rising CNH exchange rate as well as recovering signs of Chinese economy jointly strengthened forex sales forces.

China's economy has shown bottom-out signs and international capital further raised confidence in the growth of Chinese economy, which has driven up CNH exchange rate and boosted onshore RMB exchange rate as well.

A report by the Bank of China pointed out that after RMB exchange rate began to see two-way fluctuations, market players do not just depend on depreciation expectations to determine their forex sales. Instead, investment intention has become a major factor affecting enterprises' forex settlement.

AsChina's economy is reviving, domestic enterprises' forex sales and external capital's inflow have increased and promoted RMB exchange rate to reverse the earlier weak trend.

In the second half of this year,China's market-oriented reform on RMB exchange rate will accelerate and the exchange rate policy will also take 'stabilizing exports' into consideration, said the SPD Bank. In the light of this, the Chinese yuan is likely to see a moderate appreciation over the following months of this year, the bank predicted.   (Edited by Liu Xiaoyun,