SHANGHAI: China's yuan advanced to a six-month high against the dollar on Wednesday, aided by strong corporate demand as the dollar lost some of its overnight strength against other major currencies.
Th dollar had surged after US Federal Reserve Chair Jerome Powell unexpectedly signaled a faster taper of stimulus, despite uncertainty around the new Omicron coronavirus variant.
Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.3693 per dollar, 101 pips or 0.16% firmer than the previous fix of 6.3794, the strongest since June 1.
In spot market, the onshore yuan opened at 6.3700 per dollar and quickly jumped to a high of 6.3596, the firmest level since May 31, and was not far from this year's high of 6.3565, having remained on an ascent for the past four months.
By midday, the yuan was changing hands at 6.3625, 23 pips firmer than the previous late session close.
Traders said corporate dollar selling remained the key force driving the yuan higher on Wednesday morning and was likely to continue in the remainder of this year.
Chinese companies usually have higher demand for the yuan in the year-end and towards the Lunar New Year holiday in January due to various upcoming payments.
Some analysts said the yuan had room to make further gains, and they expected the authorities to do little to curb the currency's strength for now.
"Strong exports will keep the yuan resilient," said Eugenia Victorino, head of Asia strategy at SEB.
"Even with expectations of interest rate hikes by the Federal Reserve, we see room for modest declines in USD/CNY to trade to 6.30 by end-2022," she said.
Yuan's trade-weighted value against a basket of major currencies stood at 102.71 on Wednesday, and was up 8.29% year-to-date, according to Reuters calculation based on official data.
By midday, the broad dollar index traded at 95.959, while the offshore yuan was trading at 6.3648 per dollar.
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