BEIJING: China's yuan inched up against the dollar on Thursday as investors shifted their attention to the annual parliamentary gathering for more clues on the economic agenda.
The rubber-stamp parliament is expected to unveil more stimulus to cushion slowing growth, with war in Ukraine adding fresh uncertainty, senior experts and policy insiders told Reuters.
Investors will also be looking for the government to announce a slew of economic and fiscal targets at the meeting, which it set to start on March 5.
"Our (China's) monetary policy stance and attitude towards FX policy could be revealed in Saturday's government report," said a trader at Chinese bank.
Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate at 6.3016 per dollar, 335 pips or 0.53% firmer than the previous fix 6.3351.
Thursday's official guidance rate was largely in line with market expectations and drove the yuan's trade weighted CFETS basket index to 105.55, the highest since Aug.7, 2015, and up 3% so far this year.
In the spot market, onshore yuan opened at 6.3181 per dollar and was changing hands at 6.3183 at midday, 27 pips firmer than the previous late session close.
Analysts at OCBC Wing Hang Bank said geopolitical tensions between Russia and Ukraine have continued to drive safe-haven bids for the Chinese currency.
"Along with higher commodity prices and chaos in supply chain, robust exports are likely to continue," they said in a note, adding the rising yuan could face some resistance at 6.30 per dollar, when "the central bank could possibly step in" to curb excess strength.
Traders said the market was little changed after the Federal Reserve Chair Jerome Powell's affirmation overnight about an interest rate hike in the United States this month as markets had already priced in the monetary tightening move.
Powell said the Fed would begin "carefully" raising interest rates at its upcoming March meeting but be ready to move more aggressively if inflation does not cool as quickly as expected.
By midday, the global dollar index rose to 97.536 from the previous close of 97.385, while the offshore yuan was trading at 6.3236 per dollar.