China central bank raises yuan fixing after US dollar drops on Fed rate outlook

A post office employee counts Chinese yuan at a post office branch set up inside Beijing's Great Hall of the People.
A post office employee counts Chinese yuan at a post office branch set up inside Beijing's Great Hall of the People. PHOTO: AFP

BEIJING (BLOOMBERG) - China's central bank raised the yuan's daily fixing by the most in almost a week after a scaling back of Federal Reserve interest-rate expectations prompted a drop in the greenback.

The People's Bank of China strengthened its reference rate by 0.32 per cent to 6.4961 per US dollar, ending a three-day weakening run. The move lagged a 1.1 per cent overnight decline in a gauge of dollar strength. The offshore yuan extended losses, trading down 0.12 per cent at 6.4934 as of 9:35 am in Hong Kong. The onshore rate rose 0.38 per cent, the most in almost two weeks.

"The fixing is not reflecting all the dollar weakness overnight," said Tommy Ong, managing director for treasury and markets at DBS Hong Kong Ltd. "This shows that the PBOC doesn't want the currency to strengthen too much."

Fed officials cited the potential impact from weaker global growth and financial-market turmoil on the US economy for keeping the target range for the benchmark federal funds rate at between 0.25 per cent and 0.5 per cent, according to a statement released by the US central bank on Wednesday.