The Chinese yuan recovered ground on Thursday after the People’s Bank of China set a stronger-than-expected midpoint fixing, while the U.S. dollar retreated following projections that Democrats had secured control of the House of Representatives in the midterm elections.
The PBOC lifted the yuan’s daily reference rate by 137 pips to 6.9377 per dollar, signaling policymakers’ comfort with the currency’s current level and dampening speculation of a sustained depreciation trajectory. The onshore yuan CNY=CFXS climbed 0.3% to 6.9450, while its offshore counterpart CNH=D3 advanced 0.4% to 6.9385.
The dollar index .DXY, which tracks the greenback against a basket of six major peers, slipped 0.2% to 96.12 as investors digested the implications of a divided U.S. Congress. A Democratic House majority is widely seen as reducing the likelihood of further fiscal stimulus, tempering expectations for aggressive Federal Reserve tightening.
“The midpoint fixing today was a clear signal that the PBOC wants to stabilize the yuan around the 6.95 level,” said a senior trader at a Chinese bank in Shanghai. “Combined with the dollar’s broad pullback, the environment is favorable for a near-term rebound.”
Market participants now await U.S. inflation data due later this week for further clues on the Fed’s policy path, while monitoring any escalation in Sino-U.S. trade tensions under the new political landscape in Washington.