SHANGHAI: China’s yuan rose to a 10-month high against the dollar on Tuesday, underpinned by a weaker greenback on rising expectations of a US rate cut and the strongest official midpoint set by the central bank since November last year.
The onshore yuan firmed to 7.1220 per dollar shortly after market opened, the highest since November 6, 2024.
Meanwhile, the dollar sank to an almost seven-week low on Tuesday as investors braced for US data revisions that could show the jobs markets in worse shape than initially thought.
A weaker dollar has helped the yuan rise 2.5% this year.
UBS traders said they did not anticipate significant yuan moves during onshore trading hours, citing a steady fix.
However, they flagged potential for further unwinding of long dollar positions, which could push the offshore yuan towards 7.1000 per dollar after onshore market close.
The offshore yuan traded at 7.1194 yuan per dollar, up about 0.05% in Asian trade, hovering near its strongest level in 10 months.
Prior to the market opening, the People’s Bank of China set the yuan midpoint rate at 7.1008 per dollar, its strongest since Nov. 6, 2024, and 217 pips firmer than a Reuters’ estimate.
The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
The dollar came under renewed selling pressure as investors ramped up bets on the Federal Reserve signalling further rate cuts at next week’s policy meeting, DBS analysts said in a note.
The analysts said that the dollar was also weighed down by uncertainty over the legal fate of US President Donald Trump’s tariffs imposed under the International Emergency Economic Powers Act (IEEPA).
The dollar index, which measures the greenback against a basket of currencies, was 0.016% lower at 97.38, weakest since July 24.
The spot yuan opened at 7.1267 per dollar and was last trading at 7.1239 as of 0300 GMT, 53 pips firmer than the previous late session close and 0.33% weaker than the midpoint.
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