Yuan hovers near 3-1/2-year high as investors await China trade data

SHANGHAI: China’s yuan held near a 3-1/2-year high against the dollar on Thursday, as investors assessed prospects for an Iran peace deal, while looking ahead to looming domestic trade data for fresh clues on the currency’s outlook.

Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.7895 per dollar, and 433 pips weaker than a Reuters’ estimate of 6.7462. The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.

In the spot market, the onshore yuan traded 0.04% higher at 6.7468 per dollar as of 0247 GMT, not far from a 3-1/2-year peak of 6.7455 hit a day earlier.

Its offshore counterpart fetched 6.7467 yuan per dollar, up about 0.02% in Asian trade.

Market participants will be watching Friday’s trade data closely for signals on the strength of China’s economy and the yuan’s trajectory, traders said, as solid exports and a large trade surplus continue to provide crucial support for the currency.

Yuan holds steady, softer PBOC fixing caps bullish momentum

“Given that China’s exports continue to grow at double-digit rates, the increased conversion is adding to CNY demand,” analysts at ANZ said in a note.

“However, expectations of further CNY appreciation have encouraged greater conversion. We expect the authorities to continue to allow the CNY to appreciate to address perceived undervaluation concerns,” they said, expecting the yuan to gradually strengthen to 6.6 per dollar by the end of this year.

The yuan is up roughly 3.7% versus the dollar this year, trailing only the Australian dollar’s 5.8% advance among major regional currencies but still ranking among Asia’s stronger performers.

 Separately, renewed Sino-US trade and technology tensions surfaced following the latest round of tit-for-tat measures, although traders said the developments had barely registered in currency markets.