Yuan edges higher as Fed rate caution pulls dollar off 18-month peak
China's yuan strengthened modestly against the dollar on Thursday after the US currency retreated from an 18-month high, as Federal Reserve officials cautioned over the likelihood of a rate rise this month despite hotter-than-expected inflation data.
The onshore yuan was 0.09% higher at 6.6918 per dollar by 0307 GMT, with its offshore counterpart at 6.6921, according to Reuters. Before the market opened, the People's Bank of China set the midpoint at 6.7253 per dollar, 276 pips weaker than a Reuters estimate of 6.6977. The spot rate may trade 2% either side of the daily fix.
On Thursday's official guidance, the CFETS yuan basket index, a trade-weighted measure against major trading partners, rose to a more than four-year high of 103.73, Reuters calculations based on official data showed. The yuan has gained about 5.9% this year against its major trading partners, against a 4.5% rise versus the dollar.
Pantheon Macroeconomics analysts said in a note that they expect gradual yuan appreciation through the rest of 2026 and into 2027, with occasional volatility to discourage speculative inflows, citing strong exports, particularly from high-tech industries, as giving policymakers confidence that modest appreciation is manageable.
Currency traders attributed firmer sentiment in morning deals to a run of upbeat Chinese data spanning trade and credit lending, though they said attention would quickly turn to Monday's release of third-quarter gross domestic product figures. Michelle Lam, Greater China economist at Societe Generale, said China should have little difficulty meeting its 4.5%-5.0% growth target this year, and that policymakers were likely to deliver only incremental easing through the remainder of 2026.
