Yuan firms to 3-1/2-year high on soft dollar despite weak fix

SHANGHAI: China’s yuan strengthened on Friday to a fresh 3-1/2-year high against the dollar, underpinned by broad dollar weakness, even as the central bank set the official midpoint with the largest weak bias in six months. The spot yuan opened at 6.7180 per dollar and was last trading at 6.7165 as of 0243 GMT, 13 pips firmer than the previous late session close, and the strongest since February 2023. “What also helped push the dollar weaker and JPY and Asia FX stronger was Governor Waller’s speech yesterday,” said analysts at MUFG in a note. Federal Reserve Governor Christopher Waller said on Thursday he is leaning toward keeping interest rates steady at the US central bank’s policy meeting this month if the next batch of inflation data shows price pressures are continuing to moderate. Market pricing for Federal Reserve rate hike expectations appears overstretched, particularly in the wake of the Jackson Hole symposium, and the dollar is likely to soften over time, the MUFG analysts said. Prior to the market opening, the People’s Bank of China set the midpoint rate at 6.7787 per dollar. While that was the strongest fix since February 8, 2023, it was still 694 pips weaker than a Re