China's yuan hovers near one-month high on Mideast ceasefire optimism
HONG KONG: China's yuan edged higher against the US dollar on Wednesday, nearing its strongest level in a month, as a truce between Israel and Iran continued to lift market sentiment.
The ceasefire brokered by US President Donald Trump between Iran and Israel appeared to be holding, with both sides claiming victory on Tuesday after 12 days of war.
By 0331 GMT, the yuan held its ground at 7.1684 to the dollar, hovering near the strongest level since May 26. The offshore yuan was little changed and traded at 7.1661 yuan per dollar in Asian trade.
The yuan has strengthened 0.4% against the dollar so far this month, and is up 1.8% this year against a broadly weaker greenback.
Prior to the market open, the People's Bank of China set the midpoint rate at 7.1668 per dollar, 41 pips firmer than a Reuters' estimate and near its strongest level since November 2024.
The yuan is allowed to trade within a 2% band on either side of the official midpoint each day. Based on Wednesday's fixing, it can weaken as far as 7.3101 per dollar.
'The midpoint seems to be guiding spot rates toward appreciation,' said a trader at a Chinese bank, add that there was also significant buying interest below the current spot level, so the currency may not drop much.
Yuan slips to 3-week low on Iran tensions, HK dollar hits weaker end of band
Elsewhere, the Hong Kong dollar slipped to 7.85 per US dollar on Wednesday, hitting the weaker end of its trading band for a fourth consecutive session. Investors are watching closely if the Hong Kong Monetary Authority will drain liquidity from the banking system to support the currency.
The dollar's six-currency index struggled to regain lost ground as investors clung to optimism over a fragile truce in the Middle East.
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