China's yuan steady as US monetary policy in focus

SHANGHAI: China's yuan maintained its strength against the dollar on Friday, trading around its strongest level in 3-1/2 years, as market participants awaited new hints about future US monetary policies, the source reported. The Chinese currency remained steady throughout the week, reflecting the People's Bank of China's preference for low volatility in yuan trading.

Analyst Wei He from Gavekal Dragonomics suggested that the yuan may not fluctuate significantly in the upcoming months. The onshore yuan closed at 6.7211 per dollar, slightly weaker than the previous session's close. The dollar index also remained unchanged. The US Federal Reserve's upcoming policy direction continues to be a focal point for investors.

Fed officials conveyed their lingering concerns about inflation during a gathering in Jackson Hole, Wyoming, last week. Guan Tao, chief economist at Huafu Securities, noted that long-term investor confidence in the dollar could weaken due to concerns over the US fiscal deficit, which is expected to continue expanding. However, in the short term, the dollar's movements are anticipated to be influenced by a mix of positive and negative factors, according to the former Chinese forex regulator.

The yuan is currently trading at its strongest level against the dollar since February 2023, but there are indications that the People's Bank of China has been resisting pressure for a rapid appreciation. Wei He from Gavekal Dragonomics stated that if the dollar weakens further, the PBOC would likely only permit gradual appreciation of the yuan.

The upside and downside risks for the renminbi are currently limited. Prior to the market opening on Friday, the PBOC had set the yuan's guidance rate at 6.7811 per dollar.