Yuan steady before US jobs report expected to guide Fed rate path

HONG KONG: China’s yuan was little changed against the dollar on Wednesday, with traders cautious ahead of key US jobs data that could sway the Federal Reserve’s December policy stance and the dollar’s direction.

Delayed non-farm payrolls data for September is due on Thursday, and will give investors more clues on the health of the US labour market and potential Fed rate cuts.

“Unlike the slowdown in the job market, the current US economy has not shown obvious signs of cooling … Faced with such a complex situation, there remains significant uncertainty about whether the Fed will cut interest rates in December,” analysts at China Construction Bank said.

By 0320 GMT, the yuan was 0.04% lower at 7.1100 to the dollar after trading in a range of 7.1081 to 7.1133.

Its offshore counter traded at 7.1122 yuan per dollar , down about 0.02% in Asian trade.

Despite the lack of direction in recent sessions, Barclays said it expected the USD/CNY pair to decline in the near-term given stable central bank guidance and typical year-end patterns, with the yuan potentially strengthening towards 7.05.

Positive tailwinds including “corporates stepping up FX conversions, firm signals from the PBoC via stronger CNY fixings, and better risk sentiment from the A-shares rally” have all supported the yuan’s performance, the bank said, but further gains are probably limited because the central bank remains reluctant to let the CNY strengthen significantly against the USD.

Prior to the market opening, the People’s Bank of China set the midpoint rate at 7.0872 per dollar, its weakest level in two weeks but still 249 pips firmer than a Reuters estimate.

The spot yuan is allowed to trade a maximum of 2% either side of the fixed midpoint each day. Based on Wednesday’s official guidance, the yuan is allowed to drop as far as 7.2289.

The dollar index =USD, which measures the greenback’s strength against a basket of six currencies, was flat at 99.594.