BRICS member China saw its currency, the Yuan, rise against the US dollar in the foreign exchange market. The Chinese Yuan was the most visible mover as it surged more than 0.3% against the US dollar. The broader Asian local currencies also performed higher compared to the US dollar in the day’s trade.
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So why did the Chinese Yuan climb higher than the US dollar? Why is the BRICS country eager to put the US dollar down to keep its currency, the Yuan alive? Was the price fluctuation normal or did external forces influence the currency to rise?
In this article, we will highlight what could be the cause for the Chinese Yuan’s rise against the US dollar.
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BRICS: China Dumped US Dollars To Sustain the Yuan?
Reuters quoted a source from the currency market on the condition of anonymity that it was China’s major state-owned banks that initiated largescale ‘sell’ options of the US dollar for the Chinese Yuan in the onshore markets on Monday. The move helped reverse the Chinese Yuan’s fall last week and made it climb above the US dollar this week. Even BRICS member India’s local currency, the Rupee, got a facelift against the US dollar this week.
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The report indicates that Chinese state-run banks massively sold US dollars for the Chinese Yuan making the currency rise. BRICS has been accused of interfering in the currency markets before in a similar fashion to help their local currencies rise.
Read here to know how BRICS member China sold US dollars for three days straight last year. However, BRICS countries have denied allegations of market intervention citing their Central Banks play no role in dumping US dollars. Therefore, there’s no conclusion as to the Yuan’s decent performance against the US dollar this week.