The People’s Bank of China raised its dollar-yuan peg Monday, bringing the Chinese currency to its strongest level against the greenback in two months and bolstering yuan-related exchange traded funds.
The WisdomTree Dreyfus Chinese Yuan Fund (NYSEArca: CYB), provides an actively managed approach to gain exposure to the Chinese yuan, jumped as much as 0.6% early Monday. CYB has dipped 2.1% year-to-date.
China’s central bank set its dollar-yuan central parity at 6.1485 per USD, down from the 6.1623 parity level Friday and much lower than Friday’s 6.2502 market close, reports Shen Hong for the Wall Street Journal. The diminished level translates to a stronger yuan, or less yuan needed to convert to the greenback.
The exchange rate currently stands at around 6.2401 Chinese yuan per U.S. dollar.
The PBoC sets the daily reference exchange rate to control yuan’s trading range. The currency is allowed to trade 2% in either direction of the set rate.
Beijing recently posted a robust 7% year-over-year increase in exports over May, a strong turn around from a significant slowdown earlier this year. [Economic Slowdown Threatens to Push China ETF to 2009 Lows]
“There’s likely a linkage between the central bank’s action and the better-than-expected export number. The latter may have given the central bank a bit of confidence,” Suan Teck Kin, an economist at United Overseas Bank, said in the article.