Yuan Hits 16-Month High Amid New Stimulus Measures

China's yuan reached a 16-month high against the U.S. dollar following new stimulus measures from China's central bank, including a 50 basis point cut in banks' reserve requirement ratios. The U.S. dollar declined due to soft consumer data, while major currencies like the euro and Australian dollar showed strength.

China's yuan soared to a 16-month high against the U.S. dollar on Tuesday after the world's second-largest economy announced new stimulus measures. These included a 50 basis point cut in banks' reserve requirement ratios, which promises to inject more liquidity into the economy. The move also aims to ease mortgage payments for households, boosting confidence.

The yuan strengthened by 0.61% against the dollar, hitting 7.018 per dollar. Commenting on the developments, Marc Chandler, chief market strategist at Bannockburn Global Forex, said, "It hit all the things that people wanted to see - more support for the housing market, lower interest rates, reserve rate cut, and that support for the stock market." However, he cautioned that underlying economic issues might not be fully addressed.

The dollar index fell 0.36% to 100.58 after weak U.S. consumer confidence data for September, which dropped to 98.7 from 105.6 in August. This decline follows an upsized 50 basis point rate cut by the Federal Reserve last week. The euro, Australian dollar, and British pound also showed gains against the dollar, boosted by market sentiment and central bank policies.

(With inputs from agencies.)