Yuan jumps to 3-week high on report US wants China currency stability pledge

SHANGHAI: The yuan jumped to a near three-week high against the dollar on Wednesday after a Bloomberg report said the United States was pressing China to pledge not to devalue its currency as part of a deal to end their trade war.

The report said Washington's request for a promise to keep the yuan stable was aimed at neutralizing any effort by Beijing to devalue its currency to counter US tariffs. It cited unidentified people involved in and briefed on the discussions.

The yuan fell more than 5 percent against the dollar last year as the trade war escalated, raising questions over whether China was allowing it to weaken to help its exporters. But it began to rebound late last year as Washington and Beijing resumed trade negotiations and the dollar faltered.

"The news pushed the spot yuan higher," said a trader at a Chinese bank in Shanghai.

The yuan gained more than 0.5 percent by midday, a sizable leap for a currency that normally trades in a wafer-thin range.

US President Donald Trump said on Tuesday that trade talks with China were going well and suggested he was open to pushing off the deadline to complete negotiations, saying March 1 was

not a "magical" date.

However, Rabobank said in a client note on Wednesday that

"it is impossible to force China to (both) stabilise the currency and to insist that it embraces genuine markets, which is the other key thrust of the US demands."

Prior to the market opening on Wednesday, the People's Bank of China (PBOC) set the midpoint rate at 6.7558 per dollar, 84 pips or 0.12 percent firmer than the previous fix of 6.7642.

In the spot market, the onshore yuan opened at 6.7341 per dollar and rose to a high of 6.7182 at one point, its strongest level since Feb.1.

By midday, it was changing hands at 6.7243, 357 pips firmer than the previous late session close and 0.47 percent stronger than the midpoint.

A second trader at an Asian bank said a slide in the greenback in overseas markets also lent support to the yuan.

The dollar sagged against its peers on Wednesday in the wake of falling US yields and as investors remained cautious ahead of the Federal Reserve's policy meeting minutes due later in the session.

The global dollar index fell to 96.515 at midday, from the previous close of 96.52.

The offshore yuan also followed its onshore counterpart and strengthened in morning session. It was trading at 6.7248 per dollar as of midday.