Yuan Hits Three-Year High as US Inflation Weighs on Dollar

China's yuan has reached its strongest level in over three years against the dollar, driven by US inflation data that has dimmed prospects for an imminent Federal Reserve rate hike.

The spot yuan opened at 6.7455 per dollar and was last trading at 6.7441 as of 0251 GMT, 18 pips firmer than the previous late session close.

DBS analysts said two muted inflation prints in a row have quelled worries that price pressures are broadening beyond energy, adding that a cooling labour market has removed the case for near-term Fed tightening.

The greenback's upside was also capped by the worst US budget deficit since March 2021, according to DBS analysts.