China's yuan firmer on weaker dollar, strong fixing
- The spot yuan was 0.07% higher at 6.7408 to the dollar
HONG KONG: China’s yuan rose against the US dollar on Wednesday, as the greenback drifted lower amid a selloff in US Treasuries, while the Chinese central bank set its daily midpoint rate at a 3-1/2-month high.
The spot yuan was 0.07% higher at 6.7408 to the dollar as of 0351 GMT, after trading in a range of 6.7400 to 6.7439.
That is not far from the strongest level since February 2023 of 6.7370 hit on Monday.
The dollar extended its weakness as US 30-year bond yields hit their highest since 2007 overnight due to concerns over geopolitics and government debt.
The six-currency dollar index traded at 99.58, near multi-month lows.
Prior to the market opening, the People’s Bank of China set the midpoint rate at 6.7854 per dollar, its strongest since February 8, 2023, and 433 pips weaker than a Reuters estimate.
The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
“China continues to permit gradual appreciation of the undervalued RMB. With a preference to avoid undermining exports, we continue to expect slow strengthening,” David A. Meier, an economist at Julius Baer, said in a note.
The yuan is up 0.7% against the dollar this month and 3.8% firmer this year, supported by a weaker greenback and robust exports.
BofA Securities this week raised its USD/CNY forecast through year-end to 6.6 from 6.7 previously.
“Export proceeds conversion and an undervalued CNY are the key drivers for this view, as well as increasing pressure from the G7 to address trade imbalances,” BofA analysts said in a note.
Traders are also awaiting the minutes of the US Federal
Reserve’s most recent rate-setting meeting later in the day, looking for clues as to policymakers’ views on interest rates.
The offshore yuan traded at 6.7423 yuan per dollar, up about 0.07% in Asian trade.