Yuan holds firm near 2023 highs despite dollar strength
- The offshore yuan traded at 6.698 yuan per dollar, down about 0.05% in Asian trade
HONG KONG: China’s yuan held near its strongest level in three years and nine months on Tuesday, shrugging off a strong dollar as central bank guidance kept the currency steady.
The yuan was largely steady at 6.6972 per dollar, hovering near the strongest level since January 16, 2023.
The offshore yuan traded at 6.698 yuan per dollar, down about 0.05% in Asian trade.
The dollar index stood near an 18-month peak as renewed attacks on energy infrastructure in the Middle East and Ukraine revived energy supply concerns, while elevated US Treasury yields also lent support.
“Dollar strength is mostly showing up as slower yuan appreciation pace rather than a trend depreciation,” analysts at Huatai Securities said in a note, adding that corporate FX settlement and a steady midpoint fixing were still acting as buffers.
The yuan is likely to remain range-bound in the near term as markets await clearer signals on the Federal Reserve’s rate path ahead of the US midterm elections, they added.
Prior to the market opening, the People’s Bank of China set the midpoint rate at 6.7298 per dollar, its strongest fixing since February 2, 2023, some 317 pips weaker than a Reuters estimate.
The central bank has set its daily official yuan guidance at levels weaker than market expectations for nearly a year, a move traders and analysts have interpreted as an attempt to slow the currency’s appreciation. The spot yuan is allowed to trade 2% on either side of the fixed midpoint each day.
China pushed back against foreign criticism of its exchange-rate policy last week, saying it has never pursued competitive depreciation and the market plays a decisive role in exchange-rate formation.
“We expect the RMB to keep appreciating modestly for the rest of the year, with USD/CNY trading around 6.6–6.7 by year-end,” analysts at China Securities said in a note.
“The trade surplus and potential FX settlement demand should support the RMB, but a rapid, one-way rally in the short term is unlikely.”
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