SHANGHAI: China's yuan eased from a 3-1/2-year high against the dollar on Tuesday after the central bank set the official midpoint fixing at its widest weak-side deviation from market estimates in six months, signalling unease about the pace of the currency's recent appreciation.
The yuan has emerged as one of Asia's top-performing currencies this year, rising about 4% against the dollar. Yet a swift rise risks undermining China's export competitiveness at a time when the broader economy is showing renewed signs of weakness.
Prior to the market's opening, the People's Bank of China (PBOC) set the midpoint rate at 6.7852 per dollar, 633 pips weaker than a Reuters estimate of 6.7219, the largest weaker-side deviation since February 27.
The spot yuan is allowed to trade a maximum of 2% either side of the fixed midpoint each day.
"There is a slight (shift) in the fixes over the past two days - which suggests further pushback against yuan appreciation as the fix-estimate gap widens even as USD is making a rebound," Maybank analysts said in a note.
The central bank has been setting weaker-than-expected yuan midpoints since November 2025, which analysts and traders interpret as an effort to keep the currency market stable and prevent excess yuan gains.
"Similar large weak-side deviations have appeared several times since July, but the broader trend in the daily fixing has remained steadily firmer, suggesting the central bank's bias was aimed at tempering the pace of yuan gains rather than reversing the currency's upward trajectory," said a trader at a Chinese bank.
In the spot market, the onshore yuan was 0.03% lower at 6.7242 per dollar as of 0305 GMT, compared with a 3-1/2-year high of 6.7192 hit on Friday.
Its offshore counterpart last fetched 6.7241 yuan per dollar, down about 0.01% in Asian trade.
Currency traders said market attention was largely focused on developments in U.S.-Iran tensions following Washington's expanded sanctions on Iran, as well as the Jackson Hole symposium for fresh clues on the Federal Reserve's policy outlook.
Fed Chairman Kevin Warsh's debut speech at the annual Jackson Hole conference this week, self-advertised as a choice between discussing near-term policy or broader principles, has taken on added weight as traders and analysts look for guidance about the recent jump in bond yields and for reassurance of his independence from the Trump administration. - Reuters
