Yuan eases from 3-1/2-year peak as PBOC tempers appreciation pace

HONG KONG: China’s yuan weakened slightly from its 3-1/2-year peak against the US dollar on Monday, as the central bank guided the currency lower despite broad weakness in the greenback following eight straight weeks of gains in the Chinese currency.

 The yuan last traded 0.03% lower at 6.7238 per dollar, after hitting its strongest since February 2023 on Friday during an eight-week rally.

 The offshore yuan traded at 6.7241 yuan per dollar, down about 0.05% in Asian trade.

 Prior to the market opening, the People’s Bank of China set the midpoint rate at 6.7841 per dollar. The fixing pulled back from Friday’s strongest level in more than three years and was 593 pips weaker than a Reuters estimate, edging closer to the record deviation seen in February this year.

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

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

 “The fixing continues to signal some resistance to the pace of appreciation,” analysts at OCBC said in a note.

 “The PBOC remains comfortable with gradual RMB strength but is leaning against an overly rapid or one-way move,” they added.

The yuan is up 0.9% against the dollar this month, and 4.0% firmer this year.

 The dollar’s six-currency index last traded at 98.82, struggling near multi-month lows, as the US Treasury’s move to expand purchases of older long-dated bonds has revived “dollar-debasement” trades.

 “Amid broader dollar weakness, the central bank’s midpoint guidance will continue to appreciate at its current managed pace, helping keep foreign-exchange market expectations stable,” analysts at CICC said in a note.

 Still, a further decline in the dollar will require more catalysts, with US Treasury Secretary Scott Bessent’s briefing later on Monday about the latest Iran sanctions, and the Jackson Hole symposium serving as the next key tests, they added.