The Chinese yuan is continuing its appreciation against the US dollar on Tuesday as better-than-expected manufacturing activity and continued stimulus in the banking system extended the currencyâs winning streak. The yuan has been strengthening against the greenback since the height of the coronavirus pandemic, and it is now testing the 6.8 range.
In August, the Caixin/IHS Markit manufacturing purchasing managersâ index (PMI) came in at 53.1, up from 52.8 in July â anything above 50 indicates expansion. This beat the market forecast of 52.6, and it is the biggest improvement since January 2011. Output, new orders, export sales, and buying activity increased, but staffing levels slumped. Business optimism dropped to a three-month low, while input and output costs jumped.
This comes one day after the countryâs official manufacturing PMI clocked in at 51.0 last month. Later this week, the private sector readings for the services and composite PMI and trade data will be released.
Economic data coming out of the worldâs second-largest economy have been closely monitored by global financial markets to determine how well the nationâs recovery is going. Asian stock markets were mixed on Tuesday as the Shanghai Composite, the Nikkei, and the Hang Seng indexes settled relatively flat.
On Monday, the Peopleâs Bank of China (PBoC) announced that it pumped $2.9 billion into the banking system through its seven-day overturn repurchasing agreements at an interest rate of 2.2%. The central bank said in a statement that it wanted to ensure there was ample liquidity in the financial system. Chinese officials also confirmed that it would make repo rates by depository institutions an important reference for monetary policy adjustment and price-setting in the future. Policymakers think that adjusting the countryâs benchmark interest rates is crucial for continuing its market-oriented reforms.
The USD/CNY currency pair tumbled 0.29% to 6.8285, from an opening of 6.8485, at 14:36 GMT on Tuesday. The EUR/CNY slipped 0.07% to 8.1552, from an opening of 8.1746.
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