China's yuan hits 4-year high versus dollar after Fed decision
- Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.7147 per dollar
China's yuan hit a four-year high against the dollar and trading partners after the Fed held rates. China's central bank is actively managing the currency's appreciation, influencing its daily guidance.
- Yuan's four-year high against the dollar and trading partners.
- Federal Reserve's decision to keep interest rates unchanged.
- China's central bank strategy for managing yuan appreciation.
SHANGHAI: China’s yuan hit a four-year high against the dollar and its major trading partners on Thursday after the Federal Reserve kept rates unchanged, with China’s central bank continuing to guide an orderly appreciation of the currency.
The Fed held interest rates steady, as expected, opting to delay any changes to borrowing costs until after next week’s US midterm elections while it awaits further data on inflation, which the central bank said “remains elevated.”
Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.7147 per dollar, its strongest since February 2, 2023. The spot yuan is allowed to trade a maximum of 2% either side of the fixed midpoint each day.
Thursday’s midpoint was 551 pips weaker than a Reuters estimate of 6.6596 — its largest weak-side deviation since September 15.
The central bank has been gradually strengthening its daily yuan official guidance this year, but at levels weaker than market expectations, suggesting it is seeking to manage the pace of appreciation, traders and analysts said.
“PBOC continues to allow the current direction of travel to continue, whilst reining in the pace of the USD/CNY decline,” Maybank analysts said in a note.
In the spot market, the onshore yuan strengthened to a high of 6.6620 per dollar at one point, the strongest since June 7, 2022, before changing hands at 6.6621 as of 0235 GMT.
Its offshore counterpart traded at 6.6601 per dollar, up about 0.03% in Asian trade.
Based on Thursday’s midpoint, the yuan’s trade-weighted value against its major trading partners, as measured by the yuan CFETS basket index, rose to 103.75, the highest since July 15, 2022, according to Reuters calculations based on the official data.
It has gained about 5.9% so far this year, during which the yuan rose about 5% versus the greenback.
Currency traders said they will switch their attention to the European Central Bank policy decision due later in the session, even though it is widely expected to leave rates unchanged.
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