Yuan Surges to 3-1/2-Year High as US Inflation Dims Rate Hike Prospects

China's yuan has reached its highest value against the US dollar in three and a half years, as US inflation data weighed on the greenback. The yuan was last trading at 6.7441 per dollar, up 18 pips from the previous late session close.

The People's Bank of China set the midpoint rate at 6.7888 per dollar, which was weaker than market expectations. This suggests that the central bank wants to manage the pace of appreciation.

DBS analysts said that two muted inflation prints in a row should be sufficient to quell worries about broadening price pressures beyond energy. They also pointed out that a cooling labour market removes the case for near-term Federal Reserve tightening.