HONG KONG: China’s yuan languished at a six-month low against the dollar on Thursday, as the relentless climb in US yields and greenback weighed against Asian currencies.
The dollar soared to a two-week high against its major peers on Thursday, supported by higher US bond yields ahead of key inflation data later in the week and fading hopes of Federal Reserve rate cuts any time soon.
The greenback strength has complicated efforts to support the local currency. Dollar selling by Chinese state banks seen on Wednesday was unable to stop yuan from weakness.
Analysts believe the weak momentum towards yuan and other Asian currencies could persist near-term.
“With Fed rhetoric suggesting that rate cuts can only come when they are comfortable with inflation, the path to a weaker USD could be bumpy,” Maybank analysts said in a note.
Prior to the market open, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1111 per US dollar prior to market open, the weakest since Jan. 23.
The spot yuan opened at 7.2486 per dollar and was changing hands at 7.2495 at midday, unchanged from the previous late session close and 1.95% away from the midpoint.
The currency is down 2.1% this year, pressured by relatively low yields versus other currencies and a struggling property market.The global dollar index rose to 105.129 from the previous close of 104.614.
The offshore yuan was trading -0.24% away from the onshore spot at 7.2672 per dollar.