HONG KONG: China’s yuan hovered near a one-week high against the US dollar on Thursday, as the greenback’s weakness eased pressure on the currency.
The dollar weakened to a near two-week low against other major currencies, as worries of a worsening fiscal outlook in the United States kept up pressure on sentiment.
By 0301 GMT, the yuan was traded at 7.2034 to the dollar, hovering near a one-week high.
Its offshore counterpart traded at 7.2038 yuan per dollar, down about 0.01% in Asian trade.
The currency is up 1.0% against the dollar this month and 1.3% firmer this year, as a US-China trade truce gave traders some reprieve while the greenback weakened on growing concerns over the world’s largest economy.
There is potential for the yuan to strengthen further as an offset to tariff reductions, analysts at Goldman Sachs said in a note, given the strength of China’s export sector and the undervalued levels of the currency.
“The policy preference will still likely be for a measured and controlled move, but the pathway to 7.0 on USD/CNY should allow more rapid appreciation in the rest of Asia versus the dollar,” they added.
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Prior to the market opening, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1903 per dollar, its strongest since April 3.
Volatility in the yuan is likely to remain subdued following the 90-day US-China tariff reprieve and reduction to 30% tariffs, analysts at Bank of America said in a note.
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