Key points
- China’s central parity rate for the yuan weakened by 24 pips
- Yuan fixed at 6.8195 per dollar on Wednesday
- Currency can trade within a two per cent band around the fixing
- Daily reference rate is determined before interbank market opening
- Fixing is based on quotes submitted by market makers
Main story
China’s central parity rate for the renminbi, also known as the yuan, weakened by 24 pips against the U.S. dollar on Wednesday.
According to the China Foreign Exchange Trade System, the central parity rate was set at 6.8195 yuan per dollar. Under China’s managed exchange rate system, the yuan is permitted to rise or fall by up to two per cent from the central parity rate during each trading day in the spot foreign exchange market.
The daily reference rate serves as a benchmark for currency trading and is announced before the opening of the interbank foreign exchange market.
The China Foreign Exchange Trade System said the central parity rate against the dollar is calculated based on a weighted average of prices offered by market makers before trading begins each business day.
The issues
- China’s exchange rate management framework
- Daily movements in the yuan-dollar exchange rate
- Role of central parity fixing in currency markets
- Foreign exchange market regulation in China
- Impact of currency movements on trade and investment
What’s being said
“The central parity rate of the Chinese currency renminbi, or the Yuan, weakened 24 pips to 6.8195 against the dollar on Wednesday.” — China Foreign Exchange Trade System.
“In China’s spot foreign exchange market, the Yuan is allowed to rise or fall by two per cent from the central parity rate each trading day.” — China Foreign Exchange Trade System, explaining the currency trading framework.
“The central parity rate of the Yuan against the dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day.” — China Foreign Exchange Trade System.
Bottom line
China’s central bank weakened the yuan’s daily reference rate against the dollar, while maintaining the managed exchange rate framework that allows the currency to trade within a two per cent band around the official fixing.
