The Chinese renminbi continues to rise against the weaker US dollar, as the offshore currency broke the 6.4 yuan mark on Tuesday afternoon and marked the strongest since June 2018.

The onshore renminbi also hit 6.4021 yuan to the US dollar during the day and closed at 6.4078 yuan, the highest level in the past three years.

The sharp rise caught the attention of the People’s Bank of China – the country’s central bank – with Reuters reporting on Tuesday that major state-owned banks were seen buying US dollars at around 6.4 yuan to the dollar.

The move was seen as an “effort to curb the rapid appreciation of the yuan in order to break through the key level,” the newswire reported, citing sources familiar with the matter. The rise was “a little below the psychologically significant level of 6.4 per dollar,” the report added.

Liu Guoqiang, vice-governor of the People’s Bank of China, said earlier that the renminbi has risen and fallen this year with fluctuations at a reasonable equilibrium level and the exchange rate is determined by the market.

While China is the largest centrally planned economy in the world, Liu said a managed floating exchange rate system will remain the country’s strategy for some time in the future in the face of the global COVID-19 pandemic.

DBS Bank Managing Director Tommy Ong maintained the forecast of 6.25 yuan per US dollar at the end of the year, describing it as the “bottom line” of its appreciation.

Unless the trade talks between the United States and China are revived, it would be a major obstacle to the renminbi, he added.

The renminbi’s rise above the 6.4 per dollar level is the general trend, said Carie Li, an economist at OCBC Wing Hang Bank.

The large trade surplus and net inflows of foreign direct investment have increased demand for the renminbi, Li said. This has been accompanied by the increase in treasury bond holdings of many foreign investors, he said. she declared.

There is no indication that US President Joe Biden will restart trade dialogues with Beijing anytime soon.

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