Yuan firms to 3-1/2-year high on soft dollar despite weak fix

According to Business Recorder, the Chinese yuan rose on Friday to its highest level against the dollar in three and a half years, helped by a broadly weaker greenback. In spot trading it stood at 6.7165 per dollar at 0243 GMT, lifting it 13 pips from the prior late session close and marking the strongest level since February 2023. The gain came even though the central bank's daily midpoint leaned more toward weakness than at any point in half a year.

Federal Reserve Governor Christopher Waller said on Thursday that he would favour holding rates unchanged at this month's meeting if the coming inflation readings point to easing price pressure. MUFG analysts said his remarks helped push the dollar and Asian currencies stronger, and they argued that rate-hike bets look excessive after the Jackson Hole symposium. They expect the dollar to lose ground over time.

The official midpoint of 6.7787 per dollar was the firmest since February 8, 2023, yet it sat 694 pips below a Reuters estimate, which suggests authorities are wary of a steep yuan rally. Nanhua Futures said domestic firms were converting fewer dollars and traders were waiting, slowing the gain. Strong exports and a steady trade surplus still underpin the currency, they added. They forecast the pair will mostly move between 6.69 and 6.77 in September, while the dollar index edged up 0.035% to 99.