SHANGHAI: The yuan was steady against the dollar on Friday despite US inflation data reinforcing expectations US rates will stay higher for longer, and weak Chinese prices data fuelling speculation for rate cuts by the People’s Bank of China.
Prior to market open, the PBOC set the midpoint rate flat at 7.1775 per dollar, reflecting official desire to limit the yuan’s fall.
At midday, spot yuan was trading around 7.30 per dollar, having opened at 7.3027, and was little changed from the previous late session close.
The PBOC “seems keen to stabilise USD-RMB with low daily fixings, tight CNH funding conditions and some ‘window guidance’ on outflows,” HSBC said in its currency outlook report.
But “the PBOC’s FX policy may very well be loosened later, if incoming data fails to stabilise and if more monetary easing is deemed necessary.”
In addition, “the strengthening of the USD is taking a breather in October thus far but we think this relief may be temporary,” HSBC said.
The dollar index was steady on Friday, after jumping 0.8% the previous session, following data showing US consumer prices rosed more than anticipated in September, strengthening bets on higher rates.
In contrast, data showed on Friday that China’s consumer prices were flat in September, while factory-gate prices shrank at slower pace, indicating deflationary pressures persist in the economy.
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