SHANGHAI: China’s yuan hovered at a six-month high against an easing dollar on Friday, as some exporters rushed to settle foreign exchange receipts after the Federal Reserve said the historic monetary tightening in the United States was likely over.
China has been an outlier among global central banks as it has loosened monetary policy to shore up the economy while other major economies have raised interest rates to battle stubborn inflation. Such wide yield differentials have
put downside pressure
on the yuan and risk
capital outflows.
Chinese exporters traditionally convert more of their foreign exchange receipts into the Chinese currency towards the year-end and Lunar New Year holidays for various payments, including year-end bonus handouts.
Traders said the latest comments by the Fed Chair Jerome Powell suggested a possible Fed pivot towards rate cuts and prompted exporters to rush to liquidate and accelerate the yuan gains.
Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at a six-month high of 7.0957 per dollar, 133 pips firmer than the previous fix of 7.1090.
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