The dollar <.DXY> weakened versus major peers on growing expectations, following release of minutes of the Federal Reserve's December meeting, that it might not raise U.S. interest rates at all this year. [FRX/]
While no details were available on the three days of U.S.-China trade talks in Beijing that concluded on Wednesday, some traders said the absence of any bad news from them was treated as good news, helping the yuan strengthen, as did a firmer midpoint fixing.
The official statement on the talks "should be a disappointment but the market seems to choose to be optimistic – we have the dovish Fed minutes as the backdrop though," said Frances Cheung, Westpac's head of Asia macro strategy.
Prior to market opening, the People's Bank of China (PBOC) set the midpoint rate
Onshore spot yuan
As of midday, the yuan was changing hands at 6.7896, or 279 pips firmer than the previous late session close and 0.39 percent stronger than the midpoint.
Traders said the gains initially reflected a weaker dollar in global markets on Thursday morning, and a quick breakthrough of the 6.8 per dollar level prompted market participants to liquidate long dollars in their proprietary accounts.
"It's largely due to the dollar weakness," said a trader at a regional bank in Shanghai.
Still, the trader said Thursday's yuan rise "might not be sustainable as economic data was not good, and there was no solid progress from the trade talks."
On Thursday morning, China released December producer prices, which rose at their slowest annual pace since September 2016 as factories confront a slowdown in demand even as Beijing steps up policy support to bolster the economy.
The offshore yuan was trading at 6.7873 per dollar as of midday.
At 0404 GMT, the global dollar index <.DXY> was at 95.038, compared with the previous close of 95.219.
(This story was refiled to insert missing word 'month' in headline)
(Reporting by Winni Zhou and John Ruwitch; Editing by Richard Borsuk)
