Yuan, pound see rally but yen falls after Bank of England keep rates unchanged

Chinese yuan rose on Friday morning after Beijing reported better-than expected GDP growth while the Bank of England’s decision not to reduce interest rates on Thursday drove pound sterling to a two-week high and sent the yen falling to its pre-Brexit referendum level.

The onshore yuan in Shanghai traded at 6.6794 per US dollar early Friday morning, stronger by 0.06 per cent from Thursday’s close, before it softened to 6.6825 at 10.45am. The currency has risen almost 0.1 per cent this week, ending a four-week falling streak that saw it touch six year lows last week.

The offshore yuan in Hong Kong rose by 0.1 per cent to 6.6805 in early trading on Friday before softening to 6.6880 at 10.45am. It has risen more than 0.2 per cent this week, turning around three weeks of declines.

The People’s Bank of China on Friday set the yuan reference point against the US dollar at 6.6805, 0.06 per cent or 41 basis points stronger than on Thursday. Traders are allowed to trade up to 2 per cent either side of the reference point for the day.

Beijing on Friday said the nation’s second quarter and first half GDP growth both stood at 6.7 per cent, the same as the first quarter and slightly better than market expectations of 6.6 per cent.

“There are very few major concerns regarding the yuan depreciation as the current fixing mechanism is more market oriented, providing investors with a much needed level of transparency,” said Stephen Innes, senior trader at Oanda Asia Pacific.

“In addition, policy makers have been more forthcoming with their forward guidance, which in the past has been a closely guarded secret, and investors continue to vote [with their] thumbs up,” he said.