SHANGHAI: China’s yuan steadied against the dollar on Thursday, as the central bank yet again set a much stronger guidance fix to keep the currency stable amid rising concerns over US President Donald Trump’s relentless criticism of the Federal Reserve chair.
The outlook for the greenback has become shaky and could affect other major currencies, including the yuan, traders said, as Trump denied reports he was planning to fire Fed Chair Jerome Powell but kept the door open to the possibility while reiterating his displeasure at the central bank chief’s unwillingness to cut interest rates.
As of 0342 GMT, the onshore yuan was 0.02% lower at 7.1782 per dollar, while its offshore counterpart was down about 0.01% at 7.1817.
Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate at 7.1461 per dollar, its strongest since November 8 and 242 pips firmer than a Reuters estimate. The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
“A lot of news (on Fed) and developments are going on in overseas markets,” said a trader at a foreign bank, expecting the central bank to continue to set firmer-than-expected yuan midpoint fixings to anchor market expectations at a time of uncertainty around global trade and the Fed chief.
Earlier this week, Trump said the United States would fight China “in a very friendly fashion”.
The 90-day tariff truce agreed by Washington and Beijing during trade talks in Switzerland is due to end on August 12.
“Although a fragile truce in US-China trade holds for now, the need to keep China’s exports competitive to the rest of the world is crucial in its quest to keep lowering dependence on US demand,” said Eugenia Victorino, head of Asia strategy at SEB.
She expects the offshore yuan to trade towards 7.25 by the end of this year.
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