SHANGHAI: China’s yuan climbed to a near one-week high against the dollar on Thursday, after the Federal Reserve delivered its biggest rate hike in decades but flagged that such an outsized increase would not be common.
The dollar eased from a 20-year high against a basket of currencies after the US central bank approved its biggest interest rate hike since 1994, lifting the target federal funds rate by a widely expected 75 basis points to a range of between 1.5% and 1.75%.
“FOMC decision overnight, while hawkish, helped remove some uncertainty in terms of expected Fed policy path,” analysts at Maybank said in a note.
Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.7099 per dollar, 419 pips or 0.6% firmer than the previous fix 6.7518.
In the spot market, onshore yuan opened at 6.6956 per dollar and was changing hands at 6.7006 at midday, 152 pips firmer than the previous late session close.
“Fed Chairman Powell’s comments after the rate hike decision was rather dovish, and that pressured the dollar and supported the yuan,” said a trader at a Chinese bank.
Some currency traders and analysts said recent signs of economic recovery from COVID-19 lockdowns, as suggested by a slew of better-than-expected data, including credit lending and activity indicators, continued to lend some support for the yuan.
“The Chinese economy is likely to further recover and recover at a stronger pace towards the end of this year,” said Li Lin, head of global markets research for Asia at MUFG Bank.
“With uncertainties still at large in the near term, we maintain our view that USD/CNY will be rangebound around 6.70 level for the rest of Q2, and we expect USD/CNY to decline to 6.64 by the end of 2022 on a gradual and persistent recovery in the Chinese economy, along with a weaker dollar in H2.”
Comments
Comments are closed for this article.