Yuan steady as PBOC sets fix at 3-1/2-year high; Fed decision eyed
- The spot yuan opened at 6.7700 per dollar and was last trading at 6.7722
SHANGHAI: China’s yuan held steady against the US dollar on Wednesday after the People’s Bank of China set the midpoint rate at its strongest in more than three years, while markets braced for a key Federal Reserve interest rate decision later in the day.
The spot yuan opened at 6.7700 per dollar and was last trading at 6.7722 as of 0211 GMT, 12 pips lower than the previous late session close.
The US dollar held near a one-month high on Wednesday as hostilities flared anew in the Middle East, with traders pricing in a 33% chance of a 25-basis-point hike in the Fed rate.
Taking into account historical precedents from past Fed leadership transitions, the current macro environment, and Warsh’s need to establish credibility, “we now see a slightly better than even chance of a July hike, above the roughly 40% probability currently priced in by markets,” analysts at Huatai Securities said in a note.
Prior to the market opening, the People’s Bank of China set the midpoint rate at 6.7899 per dollar, its strongest since February 10, 2023, and 264 pips weaker than a Reuters estimate.
The spot yuan is allowed to trade a maximum of 2% either side of the fixed midpoint each day.
Analysts broadly expect the yuan to continue its trend of gradual appreciation. UBS remains structurally bullish on the offshore yuan against both the euro and the US dollar in the second half of 2026, citing supportive fundamentals and policy dynamics.
Beijing’s push for yuan internationalisation suggests policymakers are more likely to tolerate modest yuan strength than aggressively resist it, as a stable currency supports monetary easing, equity market sentiment and capital flow stability, UBS analysts said.
The yuan is roughly flat against the dollar this month and 3.3% firmer this year.
The offshore yuan traded at 6.7728 yuan per dollar, down about 0.02% in Asian trade.
The dollar index, which measures the greenback against a basket of six currencies, was 0.059% lower at 101.36.