China's yuan firmer on weaker dollar, strong fixing

According to Business Recorder, the Chinese currency firmed on Wednesday against the dollar, as the greenback slipped amid a sell-off in US Treasuries. The spot yuan was 0.07% stronger at 6.7408 per dollar by 0351 GMT, after moving between 6.7400 and 6.7439. The rate sits close to its firmest point since February 2023, when 6.7370 was touched on Monday.

Overnight, US 30-year bond yields rose to levels not seen since 2007 over geopolitical and government debt worries, and the dollar extended its losses. The dollar index, which tracks six currencies, stood at 99.58, close to recent multi-month troughs. Before trading opened, the People's Bank of China set its midpoint at 6.7854 per dollar, the strongest fixing since February 8, 2023, which sat 433 pips weaker than what Reuters had estimated.

Julius Baer economist David A. Meier said in a note that China is allowing the undervalued RMB to appreciate gradually, and he expects slow strengthening as Beijing seeks to avoid harming exports. BofA Securities raised its USD/CNY year-end forecast to 6.6 from 6.7, citing export proceeds conversion and an undervalued CNY. The yuan has gained 0.7% this month and 3.8% so far this year, helped by a softer greenback and strong exports.