The Chinese currency registered its biggest one-day gain ever on Friday, as traders said the People's Bank of China appeared to have intervened to support confidence around the release of a big economic development plan.
In the onshore market, the renminbi closed 0.62 per cent stronger, its best day since China’s landmark de-pegging of its
currency in 2005. It then settled at Rmb 6.3175, its highest peak since the People’s Bank of China surprised global markets on August 11 by depreciating the local currency.
The renminbi is still 1.8 per cent weaker than at the beginning of 2015.
In the offshore CNH market, the renminbi was trading 0.27 per cent stronger at Rmb6.3325 late on Friday.
According to traders, the PBoC may have interfered on Friday to help banks avoid mark-to-market losses on short dollar positions near the end of the month. Banks typically file financial reports to regulators and internally at month-end.
In the weeks after the August 11 devaluation, the PBoC intervened in both the onshore and offshore markets to prevent steep depreciation of the yuan as capital outflows and concerns over China's softening economy were mounting. In recent weeks, however, traders say this intervention appeared to diminish. Analysts have warned that China risks exhausting its foreign currency reserves if it keeps intervening to support the renminbi.
China Plenum
At the Fifth Plenum held in Beijing, China's top policy-makers approved the country's thirteenth five-year plan. The program calls for relaxing the decades-old one-child policy
and expansion of pension and healthcare systems to bolster household
consumption.
It also sets reforms to ease market entry in the services sector and deregulate prices.
