SHANGHAI: China’s yuan weakened on Friday after surging US inflation data pointed to further dollar strength, although losses were capped by Beijing’s efforts to steady the Chinese currency ahead of the Communist Party Congress opening on Sunday.

The onshore yuan was changing hands at 7.1735 at midday, slightly weaker than the previous late session close.

The currency fell more than 0.6% in late session trading on Thursday to a two-week low of 7.2251, after data showed US core inflation jumped the most in 40 years in September, strengthening the case for further hefty rate hikes that will bolster the dollar. On Friday, the People’s Bank of China set the midpoint rate at 7.1088 per dollar prior to market open, a level that barely changed this week. The steady fixing helps anchor the yuan ahead of Party Congress, analysts say.

President Xi Jinping will take the stage on Sunday to kick off the historic congress, where he is poised to win a third term that would solidify his place as China’s most powerful ruler since Mao Zedong.

All eyes will be on his opening speech and various leadership reshuffles, but analysts say the congress is unlikely to trigger any immediate or dramatic changes in policy to revive the sputtering economy.

“Xi Jinping’s election is all but certain,” wrote Ales Koutny, emerging markets portfolio manager at Janus Henderson Investors.

“The main consideration for markets will be once the Party Congress is out of the way, if China will renew its crackdown on tech, property and other relevant industries,” Koutny said, adding China’s stock and currency market weakness reflects investor concerns.

Data released on Friday showed that China’s consumer prices in September rose at the fastest pace since April 2020, while China’s central bank chief promised stronger support for the slowing economy. However, Zichun Huang, an economist at Capital Economics, said the weak yuan is limiting the PBOC’s options for stimulating the economy.

“The main constraint at the moment is the renminbi, which is close to its weakest level in over a decade,” Huang wrote. “We don’t expect policy rate cuts until pressure on the currency eases.”