Yuan Hits Three-Year High as Markets Await Fed and BOJ Decisions

The Chinese yuan strengthened to its highest level in nearly three years against the US dollar on Monday, despite muted global currency markets.

The People's Bank of China set a stronger daily guidance for the yuan, which traded at 6.7039 per dollar in early trade before easing to 6.7074.

Investors are bracing for possible rate hikes from the Federal Reserve and the Bank of Japan, with analysts predicting that a dovish FOMC meeting outcome could lead to further yuan appreciation past 6.70.

CICC analysts wrote in a note that 'Federal Reserve policy developments could have a significant impact on the yuan exchange rate', while Goldman Sachs noted that FX losses accounted for around 4% of total earnings for Chinese-listed companies in the first half of this year, the highest share in a decade.