Chinese yuan edges higher, but stronger dollar caps gains

China's yuan strengthens against the US dollar on Thursday after the People's Bank of China (PBOC) set a firmer daily midpoint, although gains remain limited by a stronger greenback amid growing expectations of further US Federal Reserve rate hikes.

The onshore yuan rises 0.1% to 6.6684 per dollar as of 0323 GMT, after trading between 6.6667 and 6.6718. Before the market opened, the PBOC set the yuan's daily midpoint at 6.7174 per dollar, stronger than the previous session's fixing of 6.7191, but 377 pips weaker than a Reuters estimate.

The onshore yuan is permitted to trade within a 2% range on either side of the daily midpoint.


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Robust Chinese exports and corporate foreign exchange settlements continue to provide support to the domestic currency. However, a stronger dollar is limiting its appreciation potential. According to a research note from ICBC Asia, the firmer greenback has eased expectations of a sustained, one-way appreciation in the yuan.

The US dollar climbs to a 19-month high against major currencies on Thursday as investors increase bets on further Federal Reserve monetary tightening following stronger-than-expected US inflation data for October.

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Meanwhile, Chinese authorities have stepped up measures to moderate the yuan's appreciation, as a prolonged rally in the currency could further squeeze exporters' already thin profit margins.

The yuan has declined 0.2% against the dollar so far this month but remains 4.9% stronger for the year.

In offshore trading, the yuan rises around 0.09% to 6.6678 per dollar during Asian hours. Meanwhile, the dollar index, which measures the greenback against a basket of six major currencies, gains 0.175% to 103.05.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times.)