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yesterday

Yuan Firms After Fed Rate Cut as Markets Expect Modest PBOC Easing

A smaller Chinese policy response is seen as supportive of the currency by narrowing the US–China rate gap.

The headquarters of the People's Bank of China, the central bank, is pictured in Beijing, China February 3, 2020. REUTERS/Jason Lee/File Photo
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Overview

  • The US Federal Reserve lowered its benchmark rate by 25 basis points to a 4.00–4.25 percent range, pressuring the dollar.
  • The offshore yuan briefly strengthened to about 7.086 per US dollar after the decision before trading near 7.107 on Thursday morning.
  • The PBOC set Thursday’s daily midpoint at 7.1085 versus 7.1013 on Wednesday, signaling a cautious stance.
  • Analysts expect only moderate Chinese easing this year, with Standard Chartered’s Ding Shuang forecasting about a 10 basis point cut in the fourth quarter.
  • Earlier this week the currency touched its strongest level since November, moving past 7.1 to roughly 7.0999, as banks differed on the expected size of the Fed move.