China's yuan steady as US monetary policy in focus

Business Recorder reported that the Chinese yuan was little changed on Friday, hovering close to its strongest level against the dollar in 3-1/2 years. Traders are looking for fresh signals about the future direction of US monetary policy. The currency also finished the week flat, as the central bank appears comfortable with subdued volatility in trading.

Wei He, an analyst at Gavekal Dragonomics, said in a note that the People's Bank of China has taken a more cautious stance, and that the yuan is unlikely to swing much further in coming months. The onshore yuan was quoted at 6.7211 per dollar around midday, a touch weaker than the prior session's close, while the dollar index held firm. The guidance rate, which the central bank set before trading opened, stood at 6.7811 per dollar.

Attention also remains on the Federal Reserve, whose officials voiced ongoing worries about US inflation on Thursday at the Jackson Hole symposium in Wyoming. Guan Tao, chief economist at Huafu Securities, told Shanghai Securities News that long-run confidence in the dollar could be eroded by public debt concerns if the US fiscal deficit keeps widening. In the short term, he expects the dollar to fluctuate because it faces both positive and negative factors. Gavekal's He added that if the dollar weakens further, the PBOC will likely allow only gradual yuan gains, and that risks in both directions are limited for now.