China's yuan firms to near 3-1/2-year-high on exports, inflation data

HONG KONG: China’s yuan rose against the US dollar on Wednesday, hovering near a 3-1/2-year peak as better-than-expected inflation data and quicker export growth buoyed the currency.

 A softer dollar driven by a rallying yen, alongside a 3.5-year high midpoint setting by China’s central bank, further boosted the yuan.

Spot yuan was 0.04% higher at 6.7076 to the dollar as of 0302 GMT, after trading in a range of 6.7074 to 6.7099.

 That was not far away from a high of 6.7050 per dollar hit on Monday - its strongest level since February 2023.

China’s August producer price index rose 3.8% from a year earlier, official data showed, accelerating from 3.5% in July and beating a forecast increase of 3.6% in a Reuters poll.

The consumer price index (CPI) was up 0.8% year-on-year, versus a 0.5% increase in July.

This comes on the heels of strong export data released the previous day, with China’s August exports jumping 25% year-on-year, led by high-tech and AI-related demand.

“Export growth picked up moderately and momentum remained strong… strong exports continued to offer vital support for yuan’s appreciation,” Nanhua Futures analysts said in a note.

  Prior to the market opening, the People’s Bank of China set the midpoint rate at 6.7769 per dollar, its strongest since February 8, 2023.

The midpoint is 727 pips weaker than a Reuters’ estimate - its largest weak side deviation since February 27 this year.

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

 Analysts, however, pointed out that China’s domestic demand remains subdued, weighing on yuan sentiment.

 Traders are also focusing on this week’s US inflation data to assess the Federal Reserve’s rate path.

Offshore yuan traded at 6.7052 yuan per dollar, up about 0.03% in Asian trade.

The dollar’s six-currency index was at 98.77.