China’s yuan fixing rate hits 2-month high as US dollar drops
With the US dollar sagging, China’s central bank has strengthened the midpoint rate for the country’s currency in recent days
China’s central bank set the yuan’s daily fixing against the US dollar at its strongest level in more than two months, as the greenback tumbled to a multi-year low amid expectations for more interest rate cuts from the Federal Reserve later this year.
On Friday, the People’s Bank of China set the yuan’s midpoint rate – also known as the daily fixing rate – at 7.1772 per US dollar, its strongest showing since late March.
The move came as the US dollar index plummeted to 97.61 on Thursday - a three-year low - after the May producer price index came in below market expectations, prompting traders to price in more interest rate cuts by the Federal Reserve.
Amid concerns over US tariff policy and the sustainability of its debt levels, the country’s currency has been under pressure for months, lending relative strength to the yuan.
While an agreement “in principle” between China and the US after two days of trade talks in London this week appeared to signal a truce, some analysts remained cautious.
“An easing in trade tensions between the US and China should be good news for the [US] dollar, but the greenback has found gains hard to come by since [the] announcement,” said Matthew Ryan, global head of market strategy at Ebury, in a report on Wednesday.
“More work clearly needs to be done, and sentiment will likely remain fragile until a bigger breakthrough is found,” he added.