SHANGHAI: The yuan hovered near a 10-month high even as it moved a touch lower in Wednesday’s morning session, as most traders adopted a wait-and-see approach ahead of key US economic data that could determine the near-term trajectory of Federal Reserve policy.
Attention was squarely on Friday’s US non-farm payrolls report, a key piece of the puzzle in the Fed’s monetary policy deliberations with markets wagering on a quarter point rate cut at this month’s meeting.
“In the short term, the yuan is likely to remain range-bound,” said a trader at a bank who declined to be named as he is not authorised to talk to media.
“If the US dollar enters a phase of mild weakness, the yuan could rebound in an orderly fashion - though the extent of the rebound may be limited.”
The spot yuan opened at 7.1378 per dollar and was last trading at 7.1439 as of 0258 GMT, 49 pips lower than the previous late session close and 0.47percent weaker than the midpoint.
Domestic events held little sway on the day’s trading.
Chinese President Xi Jinping warned the world was facing a choice between peace or war as he held his country’s largest-ever military parade on Wednesday, flanked by Russia’s Vladimir Putin and North Korea’s Kim Jong Un.
On the economic front, China’s services activity expanded at the quickest pace in 15 months in August, buoyed by firmer demand at home and a rebound in foreign orders, a private-sector survey showed on Wednesday.
The yuan is down 0.2percent against the dollar this month, and 2.2percent firmer this year.
Prior to the market opening, the People’s Bank of China set the midpoint rate at 7.1108 per dollar, 368 pips firmer than a Reuters’ estimate. The spot yuan is allowed to trade 2percent either side of the fixed midpoint each day.
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