China's yuan rose against the dollar on Wednesday after the sudden dismissal of US Secretary of State Rex Tillerson sent the greenback lower and China's central bank lifted its official midpoint to a two-week high. The dollar was also impacted by US inflation data, which reinforced views the US Federal Reserve remained on track to raise interest rates at a gradual pace.
Prior to market opening, the People's Bank of China set the midpoint rate at 6.3205 per dollar, 13 pips firmer than the previous fix of 6.3218. Wednesday's official guidance rate was the strongest since February 27. "Hopefully the Fed can provide some stability in market confidence next week by clarifying its position on monetary policy, which we believe could see the FOMC forecast of policy rate hikes moving from three this year to four, based on robust economic fundamentals," Tai Hui, chief market strategist for Asia Pacific at J.P. Morgan Asset Management said in a note on Wednesday. The strength of the PBOC's fixing pushed the spot yuan higher. The onshore yuan opened at 6.3238 per dollar and rose to a high of 6.3136, its firmest since March 6.
As of midday, the onshore spot rate was changing hands at 6.3162 at midday, 78 pips firmer than the previous late session close and 0.07 percent stronger than the midpoint. The global dollar index fell to 89.607 from the previous close of 89.664. The offshore yuan was trading 0.06 percent firmer than the onshore spot at 6.3125 per dollar.
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