FX.co ★ Offshore Yuan Holds Decline

The offshore yuan weakened further on Wednesday, trading around 6.72 per dollar as the US currency advanced on mounting inflation concerns and rising expectations of an imminent Federal Reserve rate hike. The dollar’s strength was underpinned by renewed tensions in the Middle East, which stoked fears of additional disruptions in the Strait of Hormuz, amplifying inflationary pressures and bolstering the view that major central banks may keep monetary policy tighter for longer.

Adding to the yuan’s downside, the People’s Bank of China set the daily midpoint at 6.7829 per dollar, 591 pips weaker than the Reuters estimate, underscoring policymakers’ ongoing efforts to rein in the currency’s recent appreciation. On the geopolitical front, Russian President Vladimir Putin and Chinese President Xi Jinping discussed the possibility of a trilateral meeting with former US President Donald Trump on the sidelines of the APEC summit in China in November. Xi is also scheduled to visit Washington later this month for talks with the current US president.