Yuan holds firm near 2023 highs despite dollar strength

Business Recorder reported that on Tuesday the yuan remained near its firmest point in three years and nine months, despite a firm US dollar, as central bank guidance helped hold the currency in place. The yuan was quoted at 6.6972 per dollar, the strongest since January 16, 2023, while the offshore rate stood at 6.698 yuan per dollar, about 0.05 per cent weaker in Asian trade.

The dollar index hovered near an 18-month high as fresh strikes on energy facilities across the Middle East and Ukraine renewed fears about supply, and US Treasury yields added support. Huatai Securities analysts described the dollar's strength as a slower yuan gain rather than a trend of depreciation, noting that corporate currency conversion and a stable midpoint setting have helped cushion the currency. They expect the yuan to stay range-bound in the near term while traders wait for firmer guidance on Fed policy before the US midterm elections.

Before trading began, the People's Bank of China fixed the midpoint at 6.7298 per dollar, the firmest reference rate since February 2, 2023, yet 317 pips below a Reuters estimate. Official guidance has sat below market expectations for almost a year, which traders read as an effort to temper gains. China Securities analysts see modest yuan gains through year-end, with USD/CNY around 6.6 to 6.7, but judge a rapid one-way rally unlikely in the short term.