The yuan appreciated slightly against a basket of currencies in May despite expectations for a stronger U.S. dollar, according to an index released by financial services provider China Foreign Exchange Trade System (CFETS).
The yuan exchange rate composite index, which measures the yuan's strength relative to a basket of 13 currencies including the U.S. dollar, euro and Japanese yen, came in at 97.15 at the end of May. That marked a 0.03-percent appreciation from 97.12 a month earlier, CFETS said in an article published on its website Tuesday.
The article attributed the appreciation to the yuan's strengthening relative to other emerging market currencies. Though the yuan weakened 1.5 percent against the dollar due to anticipation over an interest rate hike in the United States, other emerging market currencies saw even sharper depreciation against the dollar, weakening by over 2 percent.
Despite a weaker yuan against the dollar in May, the market remained calm and stable as the central bank increased the transparency of a new exchange rate mechanism and enhanced communication with the market, the CFETS article said.
China overhauled its exchange rate mechanism last August, making it more market-based and setting the yuan's value with more reference to a basket of currencies instead of the dollar alone.
The composite index was first released in December 2015 to offer a more comprehensive reflection of exchange-rate changes.
Previously, market watchers had mainly fixated on the yuan-U.S. dollar rate. In May, the index that measures the yuan against the Bank for International Settlements (BIS) currency basket strengthened to 98.44 from 98.06 at the end of April, while that against the Special Drawing Rights (SDR) basket weakened to 96.21 from 97.04, according to the CFETS.
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