China's yuan edges higher in tight range as investors await Fed guidance at Jackson Hole
- The spot yuan opened at 6.7215 per dollar and was last trading at 6.7217
SHANGHAI: China’s yuan edged higher against the US dollar on Thursday, trading in tight ranges, as investors refrained from making major bets ahead of a speech by Federal Reserve Chair Kevin Warsh at the Jackson Hole symposium.
The spot yuan opened at 6.7215 per dollar and was last trading at 6.7217 as of 0206 GMT, 16 pips firmer than the previous late-session close.
The US dollar held firm after recent US inflation figures and resilient economic data nudged up expectations for further Federal Reserve rate hikes, with traders looking to the Jackson Hole central banking conference later in the day for fresh policy guidance.
Prior to the market opening, the People’s Bank of China set the midpoint rate at 6.7840 per dollar, 579 pips weaker than a Reuters estimate. The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
The central bank has been gradually strengthening its daily yuan official guidance but at levels weaker than market expectations, suggesting it wants to manage the pace of appreciation, traders and analysts said.
Meanwhile, market participants are monitoring potential external headwinds.
“Beyond the near-term macro backdrop, renewed US pressure on Iran adds another source of uncertainty for the yuan given China’s role as a major buyer of Iranian oil,” OCBC analysts said in a note.
“The immediate FX impact should remain limited so long as measures stop short of directly targeting major Chinese financial institutions, but any escalation in secondary sanctions towards Chinese firms or banks could weigh on sentiment and introduce more two-way volatility.”
The yuan is up 1.0% against the dollar this month, and 4.1% firmer since the start of the year.
In money markets, the PBOC resumed injecting funds through its overnight reverse repos into the banking system on Thursday, as cash demand picked up ahead of the month-end.
The offshore yuan traded at 6.7211 per dollar, up about 0.02% in Asian trade.
The dollar index, which measures the greenback against a basket of six currencies, was 0.003% lower at 99.12.