Yuan holds near 32-month highs as Beijing signals measured gains

HONG KONG: China’s yuan edged lower against the US dollar on Tuesday but held near 32-month highs, as Beijing set a weaker-than-expected fixing to manage the pace of appreciation.

 By 0401 GMT, the yuan was 0.04% lower at 6.9759 to the dollar after hitting a high of 6.9752, which was near the 32-month high seen on Monday.

The offshore yuan traded at 6.972 yuan per dollar, down about 0.02% in Asian trade.

Prior to the market opening, the People’s Bank of China set the midpoint rate at 7.0103 per dollar. That marked a third consecutive day of strengthening and its strongest level since September 30, 2024, but it was 369 pips weaker than a Reuters estimate.

The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.

The central bank has been gradually strengthening its daily yuan official guidance but at levels weaker than market projections, suggesting it is allowing measured appreciation, traders and analysts said.

“Considering China’s domestic agenda including industrial upgrading, technological self-reliance, growth rebalancing and RMB (yuan) internationalisation, we think the authorities will continue to facilitate slow and steady RMB appreciation,” analysts at HSBC said.

 The bank also expects a faster pace of yuan appreciation against the US dollar in coming months, due to seasonality factors in domestic foreign exchange supply and demand.

 The US dollar held to its losses against a basket of currencies on Tuesday after the Trump administration opened a criminal investigation into Federal Reserve Chair Jerome Powell, a move that threatens the central bank’s independence and faith in US assets.

“Market doubts about Fed independence often pose constraints when the dollar index trends upward, but the bearish effects could lack sustainability,” analysts at China Merchants Bank said.

 “Without support from the economic fundamentals, it would be difficult to bring about a significant rise in rate cut expectations and a trending downward movement in the dollar index.”