Chinese yuan strengthens after US keeps rates unchanged

China’s yuan continued to trade stronger on Thursday morning after the US Federal Reserve left interest rates unchanged, the currency’s third straight day of gains.

Onshore yuan in Shanghai traded at 6.6680 to the US dollar at 10.15am, 0.09 per cent or 63 points stronger than on Wednesday, while offshore yuan in Hong Kong traded at 6.6667 to the US dollar, 0.06 per cent, or 37 points stronger than Wednesday.

The People’s Bank of China on Thursday set the yuan reference point against the US dollar at 6.6597, 74 basis points or 0.11 per cent stronger than on Wednesday.

Traders are allowed to trade up to 2 per cent either side of the reference point for the day.

The US Federal Reserve announced it would keep interest rates unchanged after two-days of meetings. However, it noted stronger job growth and shrinking risks to the economy while keeping the door open to a resumption of monetary policy tightening this year.

“It was entirely expected that the Fed would leave rates unchanged. Whilst not out of the question, it is hard to see a rise in September and November. There are still a lot of risks in the global economy, plus the upcoming US presidential election. December is the first realistic opportunity for Yellen to increase rates,” said David Buckle, head of quantitative research at Fidelity International. “As long as the US dollar does not strengthen anymore and there is a bit more inflation, there is a decent chance of a Christmas raise. But that would suggest, at best, we are getting one 0.25 per cent rate rise per year.”

The market focus will turn to the Bank of Japan meeting this Friday. Japanese yen strengthened on Thursday morning, jumping 0.28 per cent to 105.09 per dollar at 10.15am ahead of the BOJ announcement.

In other currency trading, the British pound was unchanged, trading at US$1.3108 on Thursday morning while the euro weakened 0.15 per cent to US$1.1075.