HONG KONG: China’s yuan eased against the dollar on Wednesday as higher US bond yields and firmer oil prices lifted the greenback, putting pressure on Asian currencies.
The dollar strengthened against major currencies this week and held firm on Wednesday, as renewed hostilities between the US and Iran pushed oil prices higher and revived inflation concerns.
The currency’s safe-haven appeal has been reinforced by rising Treasury yields and growing expectations of a Federal Reserve rate hike.
The spot yuan was 0.03% lower at 6.7225 to the dollar as of 0309 GMT, after trading in a range of 6.7222 to 6.7250.
Asian currencies face headwinds from rising US yields and oil prices, Lloyd Chan, a senior currency analyst at MUFG Bank, said in a note.
Some analysts, however, believe a strong dollar may not be sustainable.
Even if the Fed raised interest rates in September, it may not alleviate the risks in the long-term Treasuries, and the United States’ geopolitical advantages are waning, Western Securities analysts said in a note.
Prior to the market opening, the People’s Bank of China set the midpoint rate at 6.7829 per dollar, 591 pips weaker than a Reuters’ estimate. The spot yuan is allowed to trade a maximum of 2% either side of the fixed midpoint each day.
“Despite slower economic growth in July, solid export growth alongside sluggish domestic demand should keep the CNY on an
appreciation trend,“ Goldman Sachs analysts said in a note.
The yuan is 4.0% firmer against the dollar this year.
Market participants believe the yuan’s appreciation will be gradual as China is likely to keep further currency gains to a minimum this year to support exporters.
The offshore yuan traded at 6.7238 yuan per dollar, down about 0.03% in Asian trade.
The dollar’s six-currency index was 0.064% higher at 99.74.
