China's yuan steady as dollar rebounds, investors eye US CPI

SHANGHAI: China’s yuan held steady against the US dollar on Friday as the greenback rebounded and the central bank set a strong fixing, with investors positioning cautiously ahead of US inflation data later in the day.

The spot yuan opened at 6.7119 per dollar and was last trading at 6.7109 as of 0249 GMT, 6 pips firmer than the previous late session close.

The dollar held near its highest levels of the past week and the yen slipped for a second day at the start of Asian trading on Friday as renewed fears of energy supply disruptions in the Middle East pushed up bond yields and oil prices.

Despite the dollar’s strength, Asian currencies have shown notable resilience, though analysts cautioned it may not last.

“Asia FX and rates markets have been quite benign so far despite the rise in US Treasury yields, but given the drivers of markets more recently we think the probabilities are that this resilience may not continue at least in the near-term,” MUFG analysts said in a note.

“Implied FX volatility in a pair like USD/CNH has hit multi-decade lows, and while this may certainly be for good reasons, is another indication of how the market is probably positioned right now,” they said.

The yuan is up 0.1% against the dollar this month, and is 4.2% firmer this year.

Prior to the market opening, the People’s Bank of China set the midpoint rate at 6.7743 per dollar, its strongest since Feb 6, 2023, and 569 pips weaker than a Reuters’ estimate.

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

Lu Lei, a deputy central bank governor, said on Thursday that China would keep the yuan basically stable and had no intention of seeking a trade advantage through currency depreciation.

Investor attention now turns to US consumer price index data due later on Friday, one of the last major economic releases before the Federal Reserve meets next week.

Expectations for a rate hike have already firmed after US producer prices rose in August on higher costs for goods, airline fares and hospital services.

The offshore yuan traded at 6.7115 yuan per dollar, up about 0.04% in Asian trade.

The dollar index, which measures the greenback against a basket of six currencies, was 0.030% higher at 99.11.