On December 28, the People’s Bank of China (PBoC) raised the official reference rate of the renminbi (RMB) to the highest level in 30 months, since June 26, 2018.
Specifically, the exchange rate between the yuan and the US dollar in the Chinese market was announced at 6.5236 yuan / USD, up 0.14% from the previous 6.5333 yuan / USD. This is the highest level since June 26, 2018.
According to the China Forex Trading System (CFETS), last week, the yuan strengthened against a basket of currencies. The CFETS composite index, which measures the strength of the yuan against a basket of currencies, stood at 95.21 on December 25, up 0.38 points from a week earlier.
On December 28, the PBoC pumped 20 billion yuan ($ 3.1 billion) into the market through a seven-day reverse repo operation at 2.2% interest. This move is to maintain abundant liquidity in the banking system.
A reverse repo is a process in which a central bank buys securities from commercial banks through a tender, with an agreement to resell these assets in the future.
China has vowed to pursue a prudent monetary policy in a more flexible and appropriate way.