China raises yuan rate by most in 11 years

China on Friday raised the exchange rate for the yuan currency against the US dollar by 0.56 percent from the previous day, the biggest increase in almost 11 years.

The People’s Bank of China (PBoC) fixed the yuan at 6.4589 to the greenback, according to the China Foreign Exchange Trade System, which operates the national foreign exchange market.

It was the strongest daily increase in the rate since July 2005, Bloomberg News reported.

China only allows the yuan to rise or fall two percent on either side of the daily fix, to prevent volatility and maintain control over the currency.

“This is a reaction to the dollar weakness overnight and there’s not much in the way of policy intention to read into,” Ken Cheung, Hong Kong-based currency strategist at Mizuho Bank, said.

The US dollar plunged against the Japanese yen on Thursday, after the Bank of Japan shocked markets by refraining from ramping up its stimulus.

“The expectation for a stronger yuan fix was laid by the gains for the yen after the Bank of Japan announcement,” Patrick Bennett, a strategist at Canadian Imperial Bank of Commerce in Hong Kong, said.

On Friday, the onshore yuan was quoted at 6.4729 to the dollar, up 0.14 percent from the previous day.

China rattled global investors with a surprise devaluation in August, when it guided the normally stable unit down nearly five percent in a week.