HONG KONG: China’s yuan eased from a near 10-month high against the US dollar on Tuesday, as the central bank set a weaker daily reference rate that curbed the currency’s gains.
By 0334 GMT, the yuan was 0.08% lower at 7.1430 to the dollar after trading in a range of 7.1371 to 7.1457.
Prior to the market opening, the People’s Bank of China set the midpoint rate at 7.1089 per dollar, compared to that of 7.1072 in the previous day, but 236 pips firmer than a Reuters’ estimate.
The spot yuan is allowed to trade up to 2% on either side of the fixed midpoint each day.
China’s yuan rallied to a 10-month high against the dollar on Friday, underpinned by firm central bank fixings and a buoyant stock market, as well as rising US rate cut expectations.
“This round of yuan appreciation relies more on policy guidance and temporary support from market sentiment than on any substantial improvement in domestic economic fundamentals,” Nanhua Securities analysts said in a note.
Although the yuan’s appreciation trend is clear, the central bank can moderate its support via the daily fix to manage the pace, they said.
Investors are also turning slightly cautious ahead of a military parade on Wednesday in Beijing to commemorate 80 years since the end of World War Two.
In addition, higher US 10-year yields in early Asian hours also put some pressure on yuan.
Despite the cloudy economic outlook, some analysts believe China’s upcoming Five-Year plan, a start of supply-side reforms, and hopes for progress in a US-China trade truce are all good signs for yuan-based assets.
The offshore yuan traded at 7.1408 yuan per dollar, down about 0.06% in Asian trade.
The dollar’s six-currency index was 0.187% higher at 97.83.
American Dollar Exchange Rate