China's Yuan Holds Firm Ahead of US CPI Data

China's yuan remained near a 3-1/2-year high as the People's Bank of China (PBOC) kept its daily midpoint steady, while traders awaited US inflation data. The PBOC set the fix at 6.7882 per dollar, which was weaker than a Reuters estimate by 452 pips.

This means the yuan is allowed to trade within a 2% band on either side of this midpoint, and the onshore rate stayed around 6.7465 while the offshore yuan (CNH) sat near 6.7479.

The interest-rate backdrop also mattered, as offshore yuan funding was slightly pricier than onshore, and forward pricing offered little 'carry' cushion, translating into choppier short-term pricing and more variable hedging costs for companies and investors using CNH markets to manage yuan exposure.