Chinese yuan strengthens to one-year high against USD

Beijing, Aug 28 (IANS) The Chinese yuan on Monday strengthened against the US dollar to its highest level since last August.

The central parity rate of the yuan strengthened 226 basis points to 6.6353 against the US dollar, according to the China Foreign Exchange Trade System.

The dollar index fell 0.25 per cent against a basket of six major currencies to 92.499, adding to Friday's losses, reports Xinhua news agency.

At the annual Economic Policy Symposium on Friday, US Federal Reserve Chair Janet Yellen offered no indication about the future of Washington's monetary policy.

Expectations for tighter monetary policy in the US have been dampened recently by soft inflation data.

Meanwhile, the yuan is also supported by a slew of upbeat economic data, which pointed to latest restructuring achievements and provided fresh signs of stabilisation for the Chinese economy.

China's economy expanded 6.9 per cent during the first quarter, with consumption and services, together with new innovation-driven economic sectors, playing bigger roles in the economy.

Foreign exchange reserves rose for a sixth month in July to hit $3.1 trillion, increasing $23.9 billion from a month earlier, according to the central bank.

It is the first time since June 2014 that reserves have expanded for six straight months.

With the country's fundamentals improving, the yuan is likely to advance more against the US dollar, especially when considering that some major currencies like the Euro and Australian dollar have moved up 10 per cent this year, said Lukman Otunuga, a research analyst at ForexTime, a global trading platform.

In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2 per cent from the central parity rate each trading day.

The central parity rate of the yuan against the US dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.