The yuan eases as PBOC signals caution on currency strength via fix

By Reuters SHANGHAI: China's yuan eased on Thursday but hovered near a 14-month high as the dollar softened, after the central bank set a weaker-than-expected official midpoint for the sixth consecutive session, signaling caution over rapid appreciation.

The yuan has shrugged off a trade war, slow growth, rock-bottom interest rates and a slump in foreign investment, to head for its sharpest annual gain since the pandemic year of 2020.

The People's Bank of China set the yuan's midpoint at 7.0733 per dollar before the market opened, the strongest since October 14, 2024, but 179 pips weaker than a Reuters estimate - the largest weak side deviation since the data was available in November 2022.

Overnight, both the onshore and offshore yuan had hit their strongest levels since early October last year. The spot yuan opened at 7.0750 per dollar and was last trading at 7.0685 as of 0139 GMT, 45 pips lower than the previous late session close.

The spot yuan is allowed to trade 2 per cent either side of the fixed midpoint each day. The yuan also found support as the dollar slipped to a five-week low, after weaker-than-expected economic data cemented expectations the Federal Reserve will cut interest rates at its meeting next week.

The US dollar index, which measures the greenback's strength against a basket of six currencies, was last 0.057 per cent higher at 98.95.

Some investment houses expect the Chinese yuan to strengthen next year beyond the psychologically critical 7-yuan-per-dollar mark for the first time since 2023, underpinned by narrowing yield differentials with the United States and prospects for easing trade tensions.

The offshore yuan traded at 7.0636 yuan per dollar, down about 0.07 per cent in Asian trade.

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