Delayed monetary easing in the United States has accelerated capital flows into Asian currencies, pushing the Chinese exchange rate to multi-year milestones. In response, policymakers in Beijing are actively managing the rally's velocity through daily fixings to prevent rapid imbalances. Beyond its climb against the greenback, the yuan has appreciated 5.9% this year against the CFETS trade-weighted currency basket, hitting a peak of 103.75. This broader strength reflects foreign exchange recalibration as global market participants await the European Central Bank's rate decision.
Key points
Chinese central bank officials are actively utilizing midpoint fixings to moderate the pa…: Chinese central bank officials are actively utilizing midpoint fixings to moderate the pace of the currency's upward momentum.
Continued interest rate stability from the Federal Reserve amid persistent inflation has…: Continued interest rate stability from the Federal Reserve amid persistent inflation has generated persistent upward pressure on the yuan.
International currency markets are turning their attention to the European Central Bank's…: International currency markets are turning their attention to the European Central Bank's pending policy announcement, where rates will likely remain flat.
Sources checked by our analysis pipeline: 1
The onshore yuan strengthened to 6.6620 per dollar during the session, its strongest level since June 7, 2022, before trading at 6.6621 as of 0235 GMT. The currency has gained around 5% against the dollar so far this year.
The offshore yuan traded at 6.6601 per dollar, up about 0.03% in Asian trading.
Also Read | Fed holds rates, says data will guide next move
The gains came after the Federal Reserve held interest rates steady, as expected, delaying any change in borrowing costs while awaiting further inflation data. The decision followed concerns that inflation remained elevated, with attention turning to upcoming US midterm elections.
Before the market opened, the People's Bank of China (PBOC) set the yuan's daily midpoint at 6.7147 per dollar, its strongest fixing since February 2, 2023. The spot yuan is permitted to trade within a 2% band on either side of the daily midpoint.
However, Thursday's midpoint was 551 pips weaker than the Reuters estimate of 6.6596, marking the largest deviation on the weaker side since September 15. The gap suggested that Chinese authorities were…
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