The Fed Holds Interest Rates, Chinese Yuan Strengthens to Highest Level Since 2023

Illustration of the Chinese yuan currency. The yuan strengthened to its highest level since February 2023 after the US dollar weakened and the Fed held its benchmark interest rate. Photo: Pexels.

JAKARTA - The Chinese yuan strengthened to its highest level since February 2023 on Thursday. The currency was driven by a weakening US dollar and a stronger reference rate from the Chinese central bank.

Anadolu Agency, quoted Thursday, July 30, reported that the offshore yuan rose to around 6.7530 per US dollar at 10.45 GMT. This is the strongest position for the Chinese currency since February 2023.

The offshore yuan is the yuan traded outside mainland China. Its movement is usually more free than the onshore yuan, which is traded within China.

The onshore yuan also moved higher and traded around 6.7551 per dollar.

In currency trading, a decline in the dollar-yuan exchange rate means that the yuan strengthens against the US dollar. This means that it takes less yuan to buy one US dollar.

The yuan's strengthening was also boosted by the People's Bank of China's move. The Chinese central bank set the daily mid-point rate of the yuan at 6.7892 per US dollar.

The figure is the strongest fixing since February 2023. Fixing is a daily reference rate set by the central bank as a benchmark for the movement of the yuan in the market.

The signal from the central bank shows that Chinese authorities are still comfortable with the gradual strengthening of the yuan.

The yuan's rise came after the U.S. dollar weakened. Pressure on the dollar came after the Federal Reserve kept its benchmark rate in a range of 3.5 percent to 3.75 percent on Wednesday.

The weakening of the dollar occurred after the Fed chose not to change its benchmark interest rate. This decision also became the focus of currency market participants.

Anadolu noted that the US dollar later recovered some of its losses amid rising geopolitical tensions.