China’s yuan slightly firmer as economy’s Q1 growth beats expectations

HONG KONG: The yuan edged up against the US dollar on Thursday after China reported first-quarter economic growth of 5%, beating market expectations.

 Analysts said uncertainties about the economic outlook and the lower yuan fixing rate capped some upward sentiment.

The onshore yuan was 0.02% higher at 6.8174 to the dollar at 0345 GMT after trading in a range of 6.8169 to 6.8199.

China’s gross domestic product rose 5% in the first quarter

 from a year earlier, official data showed, driven by strong exports and policy support. But the ongoing US-Israeli war on Iran is expected to raise risks to demand and growth.

 Goldman Sachs analysts said the first-quarter GDP and March activity data were mixed - citing weak retail sales, suggesting China’s economy remains “bifurcated.”

 Before the market opened, the People’s Bank of China set the midpoint rate at 6.8616 per dollar, which was 426 pips weaker than a Reuters estimate. A day earlier, the midpoint was set at 6.8582.

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

“Against the backdrop of the acceleration of RMB appreciation, the central bank’s intention to stabilize the exchange rate is obvious,” Nanhua Futures analysts said in a note.

 The yuan is up 1.2% against the dollar this month and is 2.6% firmer this year. The currency found support as investors are now pricing in a diplomatic resolution between the US and Iran, which boosted risk assets as well as expectations of no rate cuts in China this year.

 Analysts polled by Reuters expected the central bank to keep the benchmark one-year loan prime rate unchanged through the end of 2026.

The offshore yuan traded at 6.8152 yuan per dollar, up about 0.06% in Asian trade.

The dollar’s six-currency index was at 97.92.