China's yuan holds ground ahead of Fed outcome

China's yuan held its ground against the dollar on Wednesday, according to Business Recorder, despite the People's Bank of China setting a markedly firmer official midpoint. Market participants held back until the Federal Reserve announced its decision later in the day. Many expected the US central bank to raise rates for the first time in a series of possible increases.

The dollar held recent gains and hovered near multi-week peaks against several major rivals while traders waited for the Fed. The People's Bank of China set the midpoint at 6.7628 per dollar, its firmest reading since February 3, 2023, and 480 pips weaker than the Reuters estimate of 6.7148. Spot trades can move up to 2% either side of that fixing each day. Onshore yuan trading was flat at 6.7112 per dollar in early Asian hours.

Maybank analysts said the pushback from recent fixings remains mild, which keeps the USD/CNH pair broadly flat, while activity data showed weak domestic demand. Commerzbank strategist Volkmar Baur argued that the yuan's rise has lost considerable pace and forecast only gradual gains for the rest of the year. Separately, sources told Reuters that China's foreign exchange regulator has asked banks to press more corporate clients to hedge, a step meant to protect exporters from the steady climb. That gain of 4.2% this year places the currency among the strongest performers in Asia.