The Chinese Yuan has recently gained strength against the United States dollar on Tuesday. This is the third straight day of trading that the Yuan rebounded against the dollar. This recent increase in value came after almost a week when the Yuan slipped its value.
On Tuesday, the Chinese Yuan's central parity rate against the U.S. dollar hit as much as 6.836. This is the strongest the Yuan has been against the dollar since Aug. 9, according to figures released by the China Foreign Exchange Trade System.
Recent figures also showed that the Yuan posted a gain of 358 basis points from a day earlier. This represents the largest appreciation of the Yuan in a single day since July 26.
Many market experts have high hopes regarding the recent recovery of the Chinese Yuan. The Yuan has been slipping for quite some time already, with some analyst pointing the start of its downward spiral in April.
In April, the dollar started to gain strength thanks to the recovering American economy. Moreover, the dollar also gained value due to massive interest rate hikes which were the cause, according to some analysts, many major global currencies to tumble down.
In order to maintain the current upward growth of the Yuan, several Chinese authorities and regulators are working together to step up their effort. Analysts have also pointed out the effort of many Chinese authorities towards ensuring a more stable foreign exchange market.
As part of this effort, the Chinese central bank recently imposed a 20 percent reserve requirement ratio to all forward forex trading. This new regulation took effect on Aug. 6. This new regulation aims to curb market volatility, financial risks, and cross-border arbitrage.
Another regulation imposed to ensure the stability of the Chinese stock market is limit on China's spot foreign exchange market. The Yuan is only allowed to rise or fall by 2 percent from the central parity rate of each trading day.
To determine the central parity rate of the Yuan against the dollar, regulators base this on the weighted average of prices offered by all market makers which is determined before the interbank market opens each business day.
Overall, many market experts are seeing a surge in the value of the Yuan in the foreseeable future. This is despite the backdrop of the bitter trade deal in which China and the U.S. are currently intertwined in.
