Yuan holds flat near four-year peak; central bank meetings awaited

HONG KONG: China’s yuan held steady near a four-year high on Tuesday as its central bank slowed the pace of appreciation with weaker guidance, while broader currency markets were little changed ahead of major central bank interest rate decisions.

The yuan last traded largely flat at 6.6684 to the dollar, holding near the 2022 peak it hit in the previous session.

The currency’s offshore counterpart traded at 6.6680 yuan per dollar, down about 0.01% in Asian trade.

Prior to the market opening, the People’s Bank of China set the midpoint rate at 6.7171 per dollar, easing from the level it set on Monday, which was the highest since February 2023, and 440 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 official yuan guidance, but has set it at levels weaker than market expectations for nearly a year. Traders and analysts have interpreted the move as an attempt to manage the pace of the currency’s appreciation.

 The yuan is up 0.5% against the dollar this month and 4.9% so far this year, with corporate settlement demand amid robust export growth continuing to provide support even with a strong greenback.

 Data released on Tuesday showed that China’s industrial profits grew at a faster pace in September, though a deepening divergence across the economy continued to weigh on business earnings.

“My base case on this, on the dollar yuan is that we go for a period of one or two weeks of very tight-range consolidation,” said Chris Weston, head of research at Pepperstone. “I think the PBOC are fairly happy with where they’re seeing the currency.”

 Elsewhere, the dollar’s six-currency index was 0.029% higher at 102.05. Broader currency markets were largely muted as investors awaited key central bank decisions in the United States, Europe and Japan this week.