China’s yuan retreats from 32-month peak on weaker fix

SHANGHAI: China’s yuan slipped from a 32-month high against the dollar on Tuesday, after the central bank guided the currency weaker through its daily guidance fix, a move that traders saw as a signal to temper the currency’s recent gains.

Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint at 6.9858 per dollar, 15 pips weaker than the previous setting, snapping two consecutive days of strengthening.

 Analysts and traders said the central bank has been carefully managing the pace of yuan’s appreciation, consistently setting the midpoint weaker than market projections since November. And, Tuesday’s midpoint was 310 pips weaker than a Reuters estimate of 6.9548.

It shows “a deliberate move to steer the yuan on a gradual appreciation path,” FX strategists at OCBC Bank said in a note this week.

“That said, we believe policymakers are likely to maintain an orderly and measured pace of yuan appreciation. This approach aims to prevent markets from rushing to offload dollar in a disorderly manner, thereby avoiding any abrupt price fluctuations and ensuring orderly market dynamics.”

Exporters usually settle more foreign exchange receipts around this time of the year to cover various payments including employee bonuses before the Lunar New Year holiday, which falls in mid-February this year.

In the spot market, the onshore yuan changed hands at 6.9577 as of 0404 GMT, after hitting a high of 6.9535 in the previous session, the loftiest level since May 2023.

Its offshore counterpart last fetched 6.9543 at 0404 GMT.

On the spot market, major state-owned banks continued to purchase dollars, multiple traders with knowledge of the matter said, in what market participants interpreted as an effort to rein in yuan strength.

In global markets, the Japanese yen held firm after two straight sessions of sharp gains as traders remained on alert to the prospect of a coordinated currency intervention by authorities in the US and Japan.