Dollar holds close to two-year high while yuan faces pressure amid market shifts

On Monday, the dollar slipped a little, staying close to two-year highs. Meanwhile, traders will look at key U.S. economic reports this week for more information on what it means for the Federal Reserve to raise interest rates.

According to a Reuters report, the Chinese yuan, on the other hand, was in the spotlight after weakening past the critical 7.3 per USD mark in the onshore market on Friday. It was the first time in 14 months that the PBOC had worked hard to keep its level flat throughout December.

The onshore yuan fell 0.05% by Monday, while the offshore yuan rose 0.15% to 7.3487 per dollar.

Ray Attrill, head of FX strategy at National Australia Bank (NAB), said, “The PBOC seems to have stopped defending the 7.30 level.” He added, “This raises questions about whether they are now letting the dollar-yuan pair move into a higher range, which could impact other Asian currencies, as well as the Australian and New Zealand dollars.”

The PBOC set the midpoint rate, at which it trades with banks, ahead of the market’s opening on Monday at 7.1876 yuan per USD, within the 2% range.

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