SHANGHAI: China's yuan inched higher to a fresh 3-1/2-year high against the dollar on Thursday, aided by a significantly stronger central bank fixing and persistent dollar weakness driven in part by renewed gains in the Japanese yen.
The yen held its gains after a sudden, brief surge in the previous session, keeping pressure on the dollar ahead of a crucial U.S. jobs report.
Reflecting the broad weakness in the U.S. currency, the People's Bank of China set the midpoint rate at 6.7807 per dollar before the market opened, its strongest since February 8, 2023, but 640 pips weaker than a Reuters' estimate of 6.7167.
The spot yuan is allowed to trade a maximum of 2% either side of the fixed midpoint each day.
Since November 2025, the central bank has consistently set the yuan midpoint weaker than market forecasts, a move analysts and traders see as an effort to anchor currency stability and curb rapid appreciation.
In the spot market, the onshore yuan rose to a high of 6.7180 per dollar, the strongest level since February 2, 2023, before changing hands at 6.7183 as of 0328 GMT. Its offshore counterpart fetched 6.7177 yuan per dollar.
"The strength in the yuan was reflecting the rebound in the Japanese yen," said a trader at a Chinese bank, adding that investors will quickly shift their attention to U.S. nonfarm payrolls data due on Friday for more clues on the Federal Reserve's policy outlook.
Markets are now pricing in a 61% chance of a Fed rate hike in September. U.S. monetary tightening could affect major currencies including the Chinese yuan, which has gained more than 4% against the dollar so far this year to become one of the best performing Asian currencies.
"We anticipate that China's policymakers will continue to favour gradual CNY appreciation against the U.S. dollar (3-5%/year) as the option that best balances these objectives," economists at Goldman Sachs.
Those objectives include fostering growth in advanced industries, they said, as China seeks to build a "manufacturing superpower", boosting self-sufficiency in critical technologies and supply chains, and accelerating the internationalisation of the renminbi. - Reuters
