Yuan rockets to two-year high against greenback

BEIJING, Jan 15 (AFP): The Chinese currency rose on Monday to its strongest level in more than two years against the US dollar, after China's central bank raised its daily reference rate the most in three months.

The People's Bank of China set the reference rate of the yuan-also known as the renminbi-at 6.4574 to the dollar.

In the wake of the rate increase, the currency climbed on the Chinese domestic market to 6.4138 yuan to the dollar, its highest level since December 2015 and an increase of more than 0.8 percent from Friday.

China only allows the tightly controlled yuan to rise or fall two percent on either side of the daily fix, to prevent volatility in the currency.

But the central bank takes into account market pressures when setting the daily reference rate.

The yuan seemed to benefit from the weakening of the dollar, which moved on Monday to its lowest level against the euro for more than three years.

That came after a coalition agreement in Germany and at the start of a public holiday, Martin Luther King Day, in the United States.

Helped by the stabilisation of the Chinese economy, the yuan has already clearly appreciated since the summer against the dollar, gaining more than six per cent over the whole of 2017. Its inflation has increased in recent weeks.