China's yuan edges higher in tight range as investors await Fed guidance at Jackson Hole

Shanghai - China's yuan gained strength against the US dollar on Thursday, trading within a narrow range as investors remained cautious prior to Federal Reserve Chair Kevin Warsh's address at the Jackson Hole symposium. The spot yuan began the day at 6.7215 per dollar and traded at 6.7217 at 2:06 AM GMT, 16 pips higher than its previous close.

The US dollar remained strong, buoyed by recent US inflation data and solid economic performance, raising expectations for additional Federal Reserve rate hikes. Market participants awaited the Jackson Hole conference for further policy insights. The People's Bank of China set the midpoint rate at 6.7840 per dollar, which is 579 pips lower than a Reuters forecast.

The yuan is permitted to fluctuate 2% either side of this midpoint daily. The central bank has been cautiously strengthening its daily yuan guidance, but at levels below market expectations, indicating efforts to regulate the appreciation pace. Analysts noted that the yuan's upward trajectory faces potential headwinds due to renewed US pressure on Iran, which could impact China's oil imports.

As a result, the yuan is up 1.0% against the dollar this month and 4.1% since the beginning of the year. In money markets, the People's Bank of China resumed injecting funds into the banking system via overnight reverse repos, driven by increased cash demand ahead of the month-end. Meanwhile, the offshore yuan traded at 6.7211 per dollar, up about 0.02% in Asian trade, while the dollar index saw a slight dip of 0.003% to 99.12.