HONG KONG: China’s yuan hit a one-year high on Wednesday on growing expectations for an easing in US-China trade tensions, while investors awaited a Federal Reserve rate decision later in the day.
The yuan strengthened to as much as 7.0978 per dollar in morning trade, a new high since November 4, 2024.
It pared gains later and was trading 0.04% lower at 7.1016 by 02:40 GMT.
The offshore yuan traded at 7.1 yuan per dollar, down about 0.04% in Asian trade.
Ahead of his meeting with Chinese President Xi Jinping on Thursday in South Korea, US President Donald Trump said his relation with China is “very good” and the trade talks could bring “great outcome for world”.
He expects to reduce US tariffs on Chinese goods in exchange for Beijing’s commitment to curb exports of fentanyl precursor chemicals.
“The signals so far from both sides have set an optimistic tone for Thursday’s leaders’ summit,” which continues to drive up the yuan, analysts at China Merchants Bank said in a note.
The yuan is up 0.3% against the dollar this month, and 2.8% firmer this year.
Prior to the market opening, the People’s Bank of China set the midpoint rate at 7.0843 per dollar, its strongest level in a year and 119 pips firmer than a Reuters’ estimate.
The spot yuan is allowed to trade 2% either side of the fixed midpoint each day. Based on Wednesday’s official guidance, the yuan is allowed to drop as far as 7.2260.
The US dollar hovered close to a one-week low versus major peers on Wednesday ahead of an expected interest rate cut from the Fed later in the day.
A quarter-point cut is widely tipped and traders will be looking for hints on whether the market’s high expectations for a December reduction are warranted.
Comments
Comments are closed for this article.