SHANGHAI: China’s yuan hovered around a three-year peak against the dollar on Friday, after breaching a key threshold in the offshore market a day earlier, as signs of renewed hostilities in the Middle East kept gains in check.
The offshore yuan strengthened past the psychologically important 6.8-per-dollar level on Thursday on hopes of a US-Iran deal to end the war, before market sentiment soured as renewed fighting broke out.
The yuan will continue to track US dollar movements and oil prices in the short term, said Marco Sun, chief financial market analyst at MUFG (China).
“If oil prices reinforce expectations of reflation in the US and delay the Federal Reserve’s interest rate cuts, the dollar’s interest rate advantage and the dollar index may strengthen again, putting pressure on the yuan to depreciate passively,” Sun said.
The onshore yuan traded at 6.8044 per dollar as of 0254 GMT, not far from a more than three-year high of 6.8005 hit on Thursday.