China’s yuan firms, focus turns to US monetary policy

SHANGHAI: China’s yuan edged up against the dollar on Monday, as investors awaited the US Federal Reserve’s Jackson Hole symposium later this week for more policy clues and its implications for global currency markets.

As of 0339 GMT, the onshore yuan was 0.03% firmer at 7.1808 per dollar, while its offshore counterpart was up about 0.1% in Asian trade at 7.1830.

Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate at 7.1322 per dollar, its strongest since November 6, 2024 and 471 pips firmer than a Reuters’ estimate of 7.1793.

The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.

The Chinese currency has been tracking the dollar’s movements in recent weeks on prospects of a Fed pivot on monetary policy.

Markets are closely monitoring Fed Chair Jerome Powell’s remarks at the annual Jackson Hole meeting to gauge chances of an imminent rate cut in September, traders said.

A Fed rate cut could pressure the dollar and lift other major currencies, including the yuan.

Markets are now pricing in an 84% chance the Fed would ease rates by a quarter point next month, down from 98% last week, after a raft of data including a jump in US wholesale prices last month and a solid increase in retail sales figures dimmed the prospect of an oversized 50-basis-point cut.

The PBOC’s firmer-than-expected guidance underscores its commitment to maintaining currency stability, as reiterated in its latest quarterly monetary policy implementation report, Goldman Sachs economist Xinquan Chen said.

“We expect the central bank to guide a gradual appreciation via the USD/CNY fixing and avoid abrupt moves,” Chen said, adding that weaker US data or Fed rate cuts could further drive the yuan’s appreciation.

Separately, markets will monitor a meeting between US President Donald Trump and his Ukrainian counterpart Volodymyr Zelenskiy, who will be joined by some European leaders, as Washington presses Ukraine to accept a quick peace deal to end Europe’s deadliest war in 80 years.