SHANGHAI: China’s yuan held steady against a broadly weaker dollar on Thursday, after the Federal Reserve indicated that it still expects to cut US interest rates three times this year despite projecting slightly slower progress on inflation.
Fed Chair Jerome Powell said on Wednesday recent high inflation readings had not changed the underlying “story” of slowly easing price pressures in the United States.
Fed’s statement was viewed as slightly dovish as markets had braced for the possibility that policymakers could trim the number of projected rate cuts this year. That sent the dollar index down from a high of 104.149 on Wednesday to last fetch 103.212, lowest level in a week.
“Part of the reason for USDCNH to come off gently is the fact that USDCNY has been within a tight grip of the central bank via the daily central parity fix. While that limits the upside for the USDCNY, it also limits the potential for decline,” said Maybank analysts.
Overall, Beijing’s currency concerns should have eased with the US dollar at current levels, said analysts at Citi.
Prior to the market’s opening, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.0942 per US dollar, 26 pips firmer than the previous fix 7.0968.
Thursday’s midpoint was 850 pips firmer than a Reuters estimate of 7.1792.
The spot yuan opened at 7.1920 per dollar and was changing hands at 7.1979 at midday, 12 pips weaker than the previous late session close.
The offshore yuan firmed overnight and was 111 pips weaker than the onshore spot at 7.209 per dollar.
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