SHANGHAI: China’s yuan touched a near one-week high on Thursday, reflecting broad dollar weakness in global markets after the US Federal Reserve said it would not rush to raise interest rates even as it began unwinding its pandemic-era stimulus.

The dovish tone seen in the Fed’s latest policy statement and Chair Jerome Powell’s remarks in a news conference dragged the greenback lower, but some yuan traders said policy tightening and rate hikes at the US central bank would boost the dollar and pressure the yuan in mid- to long-term.

“We believe that the yield gap between the United States and other economies would widen at a slower pace than market had expected, hence give less support to the dollar than estimated,” said Marco Sun, chief financial markets analyst at MUFG Bank.

“Before the Fed reveals a clear sign of raising interest rates, we expect dollar appreciation against other major currencies and the yuan would be rather mild and chances for a tsunami-style dollar rising would be low.”

Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.3943 per dollar, 136 pips or 0.2% firmer than the previous fix of 6.4079.

In the spot market, the onshore yuan opened at 6.3950 per dollar and rose to a high of 6.3917, the strongest level since Oct. 29. By midday, it was changing hands at 6.3941, 121 pips firmer than the previous late session close.

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