Yuan Strengthens Against Weakening Dollar, Poised for Fifth Weekly Gain
The yuan edged higher against a softer dollar on Friday, on track for its fifth consecutive weekly gain – the longest winning streak in over three years. Corporate interest in converting foreign exchange receipts, recent dollar weakness, and market caution ahead of Federal Reserve Chair Jerome Powell’s speech in Jackson Hole, Wyoming, are all contributing factors to the yuan’s performance. Powell’s remarks are anticipated to provide insights into the monetary policy trajectory of the world’s largest economy, impacting global financial markets.
As of 0300 GMT, the yuan was trading 0.07% higher at 7.1428 to the dollar. If it maintains its gains until the late night close, it would have strengthened 0.23% against the dollar for the week, marking its longest weekly winning streak since May 2021. Lynn Song, chief economist for Greater China at ING, attributed the yuan’s resilience to the general weakening of the dollar over the past month or two, driven by market expectations for Fed rate cuts.
Song emphasized the importance of policymakers prioritizing currency stability going forward. China’s central bank has consistently set its daily official yuan midpoint fixing at levels above market projections for over a year, signaling efforts to support the currency. The discrepancy between official guidance and market projections has been narrowing in recent weeks. On Friday, the People’s Bank of China (PBOC) set the midpoint rate at 7.1358 per dollar, firmer than Reuters’ estimate.
The offshore yuan spot traded at 7.1425 yuan per dollar, reflecting a 0.06% increase in Asian trade. Stay tuned for further updates on the yuan’s performance.