China’s central bank has set the yuan’s daily reference rate against the US dollar at the strongest level in more than nine months, as bets on rate cuts by the Federal Reserve are growing following a dovish pivot by its chair, Jerome Powell.
On Monday, the People’s Bank of China set the yuan’s midpoint rate – also known as the daily fixing rate – at 7.1161 per US dollar, its strongest showing since early November.
Compared with 7.1321 in the previous release, Monday’s fixing also marked the largest upwards adjustment since January.
The move came after Powell’s remarks at the closely watched Federal Reserve’s annual Jackson Hole conference on Friday, when he opened the door to an interest rate cut in September – a dovish turn from his earlier stance against easing.
The offshore yuan climbed to 7.158 per US dollar by midday on Monday following the fixing – its strongest level since late July. It had surged to 7.167 on Friday as the US dollar index fell to a four-week low in the wake of Powell’s remarks.
Raymond Yeung, chief economist for Greater China at ANZ, said the market has “almost locked in” a rate cut by the Federal Reserve in September, with the focus now on the scale and pace of easing this year and across the cycle.
