Yuan Stabilizes Amid US Inflation Data, Fed Rate Hike Anticipation

The Chinese yuan strengthened in volatile trading on Friday after the US released unexpected core consumer price index data. This news supported the case for Federal Reserve officials to raise interest rates next week.

The offshore yuan pair initially rose to 6.7148 immediately following the CPI release, but then fell as much as 0.1% to 6.7060. The onshore yuan pair declined 0.1% to 6.7055 after earlier climbing to 6.7138.

Zhaopeng Xing, senior China strategist at Australia & New Zealand Banking Group, predicted that if the Fed raises rates, the yuan may stabilize around 6.70 and the yield curve will flatten. This would create room for both 10-year and to decline in value.

Elias Haddad, global head of market strategy at Brown Brothers Harriman, agreed that the Chinese currency will remain largely unaffected by the Fed decision, 'aside from a short-term blip'. The Hong Kong dollar pair held steady at 7.8424.