China’s yuan eased against the dollar as investors awaited a Federal Reserve decision on interest rates and comments from Chair Jerome Powell. While the yuan has benefitted from dollar weakness, it declined to a five-month low against major trading partners. Ongoing trade relations with the U.S. and the sale of CK Hutchison’s ports business are also critical points of focus for the market.

On Wednesday, China’s yuan experienced a slight decline against the dollar, prompting investors to anticipate the Federal Reserve’s forthcoming policy decision for insights on the U.S. economy and its implications for the global market. Although the Federal Reserve is expected to maintain current interest rates, there is notable concern regarding the potential impact of U.S. trade policies on economic forecasts.

Traders highlighted, “Markets will pay close attention to Chair Jerome Powell’s comments tonight,” indicating the level of scrutiny that will be placed on forthcoming statements from the Federal Reserve. The yuan has recently benefited from a softness in the dollar, which has depreciated approximately 4% this month due to President Trump’s unpredictable tariff strategies and recession fears.

According to Larry Hu, chief China economist at Macquarie, “Facing the weaker dollar, the People’s Bank of China (PBOC) adopted the same strategy as it did in recent years: It has held the yuan relatively steady against the dollar,” causing the yuan to devalue against a broader set of currencies. As of 0254 GMT, the onshore yuan was down by 0.1% at 7.2320 per dollar, while the offshore currency performed similarly.

The yuan’s performance against its primary trading partners reached a five-month low of 98.42, reflecting a cumulative loss exceeding 3% for the year based on calculations from official data. Despite these developments, the spot yuan has gained about 1% against the dollar year to date. The mid-point rate set by the PBOC was noted at 7.1697 per dollar, which is significantly firmer than the estimate.

Investors remain focused on U.S.-China trade relations as tariffs imposed by the U.S. weigh on market sentiment. Despite the challenges, Hu noted, “the response (from China) so far has been measured, as Beijing is still seeking negotiations that could hopefully lead to another trade deal.” Additionally, market participants are observing the developments surrounding CK Hutchison’s $22.8 billion sale of its ports business, emphasizing the ongoing intricacies within bilateral trade relations.

In summary, China’s yuan has faced depreciation against the dollar amid a complex backdrop of U.S. trade policies and Federal Reserve decisions. The anticipation of further insights from Chair Jerome Powell is of particular interest to investors, as the PBOC employs strategies to stabilize the yuan in response to dollar fluctuations. The focus remains on U.S.-China trade relations, with ongoing negotiations potentially shaping future economic landscapes.

Original Source: www.tradingview.com

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