Yuan set for flat week as oil-led dollar strength caps gains
UUP•Yuan trades in a narrow range
China's yuan traded in a narrow range against the U.S. dollar on Friday as investors grappled with renewed concerns over hostilities in the Middle East and rising oil prices.
The yuan CNY=CFXS was roughly flat at 6.7753 to the dollar as of 0241 GMT, after trading in a range of 6.7736 to 6.7767.
The currency was on track for a broadly unchanged week.
The offshore yuan fetched 6.7765 yuan per dollar CNH=, largely unchanged in Asian trade.
Prior to the market opening, the People's Bank of China set the midpoint rate CNY=PBOC at 6.7939 per dollar, 144 pips weaker than a Reuters' estimate.
The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
Dollar strength and policy concerns weigh on the currency
The dollar rode U.S. Treasury yields higher on Friday after U.S. President Donald Trump threatened "major military punishment" for Iran and its Houthi allies.
Brent crude climbed back above $100 a barrel for the first time since May.
Analysts said a surge in oil prices has led markets to increasingly price in a U.S. rate hike, lending support to the dollar and slowing the yuan's appreciation.
Tariff concerns are also keeping traders on edge. The Trump administration on Friday will impose new tariffs of 10% and 12.5% on goods from 60 trading partners, including China, over allegations of lax enforcement of forced labor bans.
"The macro backdrop has become more challenging... Higher oil prices, persistent geopolitical uncertainty, fragile equity market sentiment and renewed capital outflow pressures have all strengthened the case for protecting CNY exposure," said Wee Khoon Chong, APAC macro strategist at BNY, suggesting traders should hedge their yuan positions.
