SHANGHAI: China’s yuan was steady on Thursday as the central bank’s strong guidance offset pressure from a firmer dollar, while market attention was focused on upcoming key US inflation.

Prior to the market’s opening, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.0948 per US dollar.

That was a touch weaker than the previous fix of 7.0946, but 1,311 pips stronger than a Reuters’ estimate of 7.2259, the widest gap since November 2023.

The yuan slumped to a four-month low last week, prompting traders to bet on further declines over coming months.

However, the PBOC has continuously set a stronger-than-expected fixing rate, reflecting policymakers’ objective of preventing any rapid declines in the yuan.

In the spot market, the yuan opened at 7.2249 per dollar and was changing hands at 7.2253 at midday, 12 pips stronger than the previous late session close.

China’s yuan weakens as strengthened dollar pressures

The dollar received a boost against major currency peers on Thursday, as a Federal Reserve official said he wasn’t in a hurry to cut rates amid sticky inflation, and as traders braced for key economic data.

Traders are waiting on US core inflation figures due on Friday, following a bigger-than-expected jump in US durable goods orders on Tuesday.

Maybank analysts expect more room for two-way trades for the dollar-yuan but with an upside bias for the US currency.

“We expect PBOC to guard against further CNY weakness for now and smooth any sharp jumps in the CNY/CNH after witnessing the market reaction last Friday,” said Alex Loo, macro strategist at TD Securities.

The global dollar index rose to 104.355 from the previous close of 104.348. The offshore yuan was trading at 7.2512 per dollar.