SHANGHAI: China’s yuan firmed on Thursday, as the US dollar was broadly sold off after a better-than-expected inflation reading boosted expectations for rate cuts in the world’s largest economy.

US consumer prices increased less than expected in April, suggesting that inflation resumed its downward trend at the start of the second quarter in a boost to financial market expectations for an interest rate cut in September.

The dollar index posted its largest one-day drop on Wednesday, helping the offshore yuan strengthen 0.3% on the day.

The yuan was also helped by improved sentiment towards China’s property market and a stock market rebound that has lured back some foreign investors in recent weeks.

Prior to the market open, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.102 per US dollar, 29 pips firmer than the previous fix of 7.1049.

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