Photo:Xinhua

 Chinese currency, the yuan, soared on Tuesday morning as the US reversed its label on China as a "currency manipulator" days before the two countries are expected to sign an initial trade deal in Washington later this week. 

On Tuesday morning, the yuan's central parity rate against the greenback stood at 6.8954 points, up by 309 basis points compared with the previous trading day. It was the highest level since August 1, 2019. 

The onshore yuan rose above 6.88 on Tuesday morning and stood at 6.8701 by 10:54 am, up by 0.34 percent.

The yuan surged after the US Treasury on Monday said in a report that it found no major trading partners in violation of troubling foreign exchange practices that would trigger the (currency manipulator) label, including China.

E Zhihuan, chief economist at Bank of China (Hong Kong), said that the US' removal of the label for China is a result of the smooth progress toward a phase one trade deal between the two countries.

"It is also recognition of the resilience of the Chinese yuan's exchange rate," E told the Global Times on Tuesday.

In August, a sharp escalation of the China-US trade war sank the yuan under the key 7-per-dollar level for the first time since the 2008-09 global financial crisis. Following the currency's plunge, the US Treasury labeled China a "currency manipulator," drawing criticism from China and international institutions with observers believing that the Trump administration used the currency manipulator label as a political tool to gain leverage in trade talks with China.   

"The yuan's value is decided by market supply and demand. Its fluctuation is normal market reactions. The yuan experienced a complete fluctuation cycle after returning to above 7 again," E said.

Although some overseas media said that the label removal is a "major concession" made by the US, some Chinese experts have argued that the label should not be there at all to start with.

Zhou Yu, director of the Research Center of International Finance at the Shanghai Academy of Social Sciences, has recently said that the US has called China a currency manipulator as a kind of excuse to launch protectionism sanctions against China. 

The mainland stocks also rose on Tuesday morning. By 11:10 am, the Shanghai Composite Index edged up by 0.13 percent, while the Shenzhen Component Index rose by 0.07 percent.