Yuan steady near 3-1/2-year high as markets watch for US inflation data

HONG KONG: China’s yuan held firm on Wednesday near a 3-1/2-year high against the dollar, as stronger official guidance kept the currency anchored ahead of highly anticipated US CPI data.

 The yuan last traded flat at 6.7465 to the US dollar, holding steady after hitting its strongest since February 2023 on Monday.

 The offshore yuan traded at 6.7479 yuan per dollar, down about 0.02% in Asian trade.

 Investors in global currency markets watched for the release later in the day of US inflation data, which could offer more clues to the Federal Reserve’s next policy moves after soft jobs data last week prompted paring of bets for more tightening.

The dollar’s six-currency index was little changed at 99.86.

 “With the US dollar index expected to remain volatile, the yuan is likely to fluctuate in both directions alongside the greenback this month,” analysts at China Construction Bank wrote in a note.

“We maintain our overall view that the yuan will appreciate steadily over the course of the year, but its upside will be limited,” they said, adding that prospects were slim for another rapid rebound in valuation for the yuan.

 The yuan is up 0.6% against the dollar this month and 3.7% firmer this year.

 Prior to the market opening, the People’s Bank of China set the midpoint rate at 6.7882 per dollar, its strongest since February 8, 2023 but 452 pips weaker than a Reuters estimate.

 The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.

 The central bank has been gradually strengthening its daily yuan guidance but at levels weaker than market expectations, suggesting it wants to manage the pace of appreciation, traders and analysts said.