The yuan climbed to a 19-year high on speculation China will step up efforts to arrest a seven-quarter slowdown in the world’s second-largest economy.
The currency had its biggest gain in six months after the People’s Bank of China strengthened its reference rate today by the most since Aug. 22. The central bank injected a record amount of funds into the financial system this week to address a cash squeeze ahead of a weeklong holiday that starts Oct. 1. The Shanghai Composite Index jumped 4.1 percent in the past two days, buoyed by a report suggesting policy makers plan to unveil measures to support Chinese stocks.
“The yuan forwards are strengthening as the onshore spot rose to a record high, which took some investors by surprise,” said Banny Lam, a Hong Kong-based chief economist at CCB International Securities Ltd., a unit of China’s second-largest bank by market value. “Those investors might have to terminate some short positions,” he said, referring to bets China’s currency would weaken.