HONG KONG: China’s yuan was flat on Friday as softer US inflation data drew muted dollar reaction, but remained on track for its fourth straight weekly gain.
The yuan traded in a narrow range and was at 7.0411 by 0425 GMT, near a 14-month high of 7.0400 hit on Thursday.
The yuan is now heading towards its fourth straight week of gains, the longest streak since June. The currency is up 0.5% against the dollar this month and 3.7% firmer this year, on track for its strongest annual gain since the pandemic year of 2020.
Its offshore counterpart traded at 7.0367 yuan per dollar , down about 0.05% in Asian trade.
“We expect RMB strength to be front-loaded in early 2026, likely testing the 7.0 level in the next three months, before stabilising in the second half,” analysts at LGT Private Banking Asia said in a research note.
“Factors that may drive early 2026 RMB strength include a dovish Fed bias, PBOC’s willingness to lower USDCNY fix, and seasonal mainland exporter conversions ahead of Chinese New Year.”
Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate at 7.0550 per dollar, its strongest since September 30, 2024, and 172 pips weaker than a Reuters estimate.
The spot yuan is allowed to trade a maximum of 2% on either side of the fixed midpoint each day. Based on Friday’s official guidance, the yuan is allowed to drop as far as 7.1961.
The central bank has been gradually strengthening its daily yuan official guidance, with a bias suggesting it is allowing some appreciation, traders and analysts said.
Elsewhere, the dollar index versus six major currencies held steady after data showed US consumer prices rose less than expected last month.
However, some analysts had doubts about the figures as data collection was interrupted by the US government shutdown.
“Quality issues in this period’s statistics may have caused data distortion, and we still need December data to confirm the cooling of US inflation, so markets showed little volatility,” analysts at China Merchants Bank said in a note. ‑Reuters
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