SHANGHAI (Reuters) – Inched higher against a softer dollar on Friday and looked poised for a fifth straight weekly gain, the longest winning streak in more than three years.
The yuan was supported by stronger corporate interest in converting their foreign exchange earnings following the dollar’s recent weakness, but gains were limited by market caution ahead of Fed Chairman Jerome Powell’s speech later on Friday in Jackson Hole, Wyoming.
Powell’s comments are expected to provide more clues about the monetary policy trajectory in the world’s largest economy and influence global financial markets, traders said.
At 0300 GMT, the yuan was trading 0.07% higher at 7.1428 against the dollar. If it were to maintain all the gains into the late evening close, it would have risen 0.23% against the dollar this week, posting its longest weekly winning streak since May 2021.
“Yuan depreciation pressures have eased as we have seen a general weakening of the dollar over the past two months,” said Lynn Song, chief economist for Greater China at ING.
“The main reason for this is on the external side, as market expectations for Fed rate cuts have increased, and if the Fed cuts rates at a relatively rapid pace, yield spreads should move in favor of a continued recovery of the yuan. ”
Song expected policymakers to continue to view the currency’s stability as a high priority.
China’s central bank has set its daily official yuan midpoint setting at a level firmer than market projections for more than a year, with traders and analysts widely interpreting this as an official attempt to keep the currency stable and supported.
And the discrepancy between official guidance and market projections has gradually narrowed in recent weeks.
On Friday, the People’s Bank of China (PBOC) set the mid-rate, around which the yuan can trade within a 2% range, at 7.1358 per dollar, 122 pips firmer than a Reuters estimate.
It traded at 7.1425 yuan per dollar, up about 0.06% in Asian trading.
LEVELS AT 03:00 GMT:
INSTRUMENT CURRENT UP/DOWN(-) % CHANGE DAY HIGH DAY
vs USD US LAST YEAR TO DATE LOW
NEAR %
Spot Yuan 7.1428 0.04 -0.57 7.1418 7.1478
Offshore 7.1424 0.06 -0.24 7.1409 7.1486
yuan spot
