Yuan Surges to 3-1/2-Year High as Dollar Weakness Persists
China's yuan reached a fresh three-and-a-half-year high against the US dollar on Thursday, driven by a stronger central bank fixing and persistent dollar weakness. The People's Bank of China set the midpoint rate at 6.7807 per dollar, its strongest since February 8, 2023, but 640 pips weaker than a Reuters' estimate.
The spot yuan rose to a high of 6.7180 per dollar, the strongest level since February 2, 2023, before changing hands at 6.7183 as of 0328 GMT. Its offshore counterpart fetched 6.7177 yuan per dollar.
A trader at a Chinese bank attributed the strength in the yuan to the rebound in the Japanese yen, saying investors will quickly shift their attention to US nonfarm payrolls data due on Friday for more clues on the Federal Reserve's policy outlook.
Markets are now pricing in a 61% chance of a Fed rate hike in September. This could affect major currencies, including the yuan, which has gained more than 4% against the dollar so far this year to become one of the best performing Asian currencies.