HONG KONG: China’s yuan rose against the dollar on Wednesday, extending gains as the latest efforts by Beijing to stimulate a shaky economy was further underpinned by a broadly softer US currency.
China cut benchmark lending rates for the first time since October on Tuesday, while major state banks lowered deposit rates as authorities take steps to buffer the economy from the impact of the Sino-US trade war.
People’s Bank of China Governor Pan Gongsheng also vowed to implement “appropriately lose” monetary policy to support key areas including technological innovation, consumption, private small businesses, and stabilizing foreign trade.
By 03:07 GMT, the yuan was 0.11% higher at 7.2085 to the dollar after trading in a range of 7.2075 to 7.2200.
The offshore yuan traded at 7.207 yuan per dollar, up about 0.11% in Asian trade.
“The yuan will likely outperform the dollar in the short term as market sentiment improves” on policy support and following this month’s agreement between China and the United States to pause their trade war, analysts at Nanhua Futures said in a note on Wednesday.
Prior to the market opening, the PBOC set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1937 per dollar, 196 pips firmer than a Reuters’ estimate.
China’s yuan slips as investors wary ahead of Sino-US trade talks
Based on the official guidance, the yuan is allowed to drop as far as 7.3376.
The dollar’s six-currency index edged lower to 99.68, extending a two-day slide against major peers, as President Donald Trump failed to convince Republican holdouts to back his sweeping tax bill.
Traders were also wary of US officials potentially angling for a weaker dollar at Group of Seven finance minister meetings currently underway in Canada.
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