The greenback slid following mixed US jobs data that showed slower wage growth, while authorities stepped in to cap the fallout from the sudden collapse of Silicon Valley Bank. Investors now expect the Fed to take a less aggressive monetary path.
Goldman Sachs’ analysts said they no longer expected the Fed to deliver a rate hike at its March meeting and there was considerable uncertainty about the path beyond March.
The prospect of the Fed being less hawkish put downward pressure on the dollar.
Prior to market opening, the People’s Bank of China (PBOC) set the yuan’s midpoint rate at 6.9375 per dollar, 280 pips or 0.4% firmer than the previous fix of 6.9655.
In the spot market, the onshore yuan opened at 6.9088 per dollar and at one point strengthened as far as 6.8662, the loftiest level since March 1.
By midday, it was changing hands at 6.8745, 450 pips firmer than the previous late session close.
Imminent pressure for the yuan to weaken past 7 per dollar has ebbed, said Ken Cheung, chief Asian FX strategist at Mizuho Bank.
“Market projections for the scope of Fed’s interest rate hike in March have changed significantly, in addition to broad risk-on sentiment,” Cheung said.
“And China’s monetary policy should remain stable as China kept its central bank governor in his post.”
Cheung added that investors would pay attention to US inflation data due on Tuesday for more clues on the health of the world’s largest economy.
Beijing surprised the market by keeping its central bank governor and finance minister in their posts at the annual session of the rubber-stamp parliament on Sunday, prioritising continuity as economic challenges loomed at home and abroad.
By midday, the global dollar index fell to 103.801 from the previous close of 104.576, while the offshore yuan was trading at 6.8729 per dollar.
The one-year forward value for the offshore yuan traded at 6.7141 per dollar, implying a 2.37% appreciation within 12 months.