SHANGHAI: China’s yuan held steady against the US dollar on Tuesday, as the Bank of Japan kept policy rates on hold, while market focus shifted to the US Federal Reserve rate decision for clues on the policy outlook in the world’s biggest economy.
The BOJ kept interest rates steady on Tuesday and decided to decelerate the pace of its balance sheet drawdown next year, signaling its preference to move cautiously in removing remnants of its massive, decade-long stimulus.
The onshore and offshore yuan barely reacted to the rate decision amid the backdrop of fighting between Israel and Iran, and fears of a broader regional conflict.
“The yen’s impact on the yuan has recently been indirect, largely channeled through movements in the US dollar index,” said Ding Liang, a strategist at research firm Macro Hive.
The US dollar index, which measures the currency against six major rivals, rose 0.063% to 98.24.
The spot yuan opened at 7.1799 per dollar and was last trading at 7.1815 as of 0235 GMT, 3 pips firmer than the previous late session close and 0.1% weaker than the midpoint.
All eyes are on the Federal Reserve’s policy decision due Wednesday, with markets widely expecting the central bank to leave interest rates unchanged. Investors will be watching closely for any signals on the future path of monetary policy.
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Prior to the market opening, the People’s Bank of China set the midpoint rate at 7.1746 per dollar, its strongest since March 19 and 74 pips firmer than a Reuters’ estimate.
The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
Front-loading of policy support measures have managed to hold up domestic activities leading to a boost in retail sales in May, Citi analysts said.
The analysts said they don’t expect any major policy changes at the July Politburo meeting.
The offshore yuan traded at 7.1814 yuan per dollar, up about 0.03% in Asian trade.
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