Yuan steady after dollar softens, awaits US CPI
- The spot yuan opened at 6.6711 per dollar and was trading at 6.671
China's yuan held steady against the US dollar, influenced by greenback losses and higher dollar deposit rates. Markets await US inflation data for clues on policy, with the PBOC moderating yuan appreciation.
- Factors influencing the yuan's stability and potential gains.
- Chinese central bank's measures to moderate yuan appreciation.
- Impact of upcoming US inflation data on the dollar and Fed policy.
SHANGHAI: China’s yuan held steady against the US dollar on Tuesday, supported by overnight losses in the greenback even as higher dollar deposit rates capped its gains, with markets awaiting US inflation data for clues on the policy outlook.
A sharp drop in global oil prices and an improvement in risk appetite that lifted US technology stocks provided some support for the yuan.
The spot yuan opened at 6.6711 per dollar and was trading at 6.671 as of 0300 GMT, 14 pips firmer than the previous session’s close.
Its gains were limited by recent moves by several Chinese banks to sharply lift dollar deposit rates, in some cases above US benchmarks, which bankers say are attracting cash and could temper gains for the yuan.
The Chinese currency has rallied by about 10% against the dollar since early 2025, prompting authorities to step in to slow its advance.
The People’s Bank of China last week announced it would raise the amount of foreign currency reserves that banks must hold.
“We continue to view recent policy measures as an attempt to moderate the pace rather than reverse the direction of RMB appreciation,” analysts at OCBC said, adding that their measured appreciation bias remained intact.
“Looking ahead, broader USD movements may increasingly influence USDCNH, although daily fixing guidance remains key,” they said.
Ahead of the market open, the PBOC set the midpoint rate at 6.7167 per dollar, 512 pips weaker than a Reuters estimate.
The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
The offshore yuan traded at 6.6685 yuan per dollar, up about 0.02% in Asian trade.
The dollar index, which measures the greenback against a basket of six currencies, was 0.020% higher at 101.7.
Attention now turns to US consumer price data later on Tuesday, after stronger-than-expected payrolls figures bolstered the case for further Federal Reserve interest rate hikes.
Headline inflation is seen picking up to 3.9% and core to 2.8%, year-on-year, in October, according to economists polled by Reuters, so anything hotter than that will add to rate hike expectations and probably lift the dollar, analysts said.
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