FX.co ★ Offshore Yuan Edges Lower

The offshore yuan slightly declined to approximately 7.19 per dollar on Wednesday, as investors processed the latest monetary policy decision from the People’s Bank of China. The central bank maintained its key lending rates at historically low levels for the third consecutive month during the August meeting, aligning with market predictions. The one-year Loan Prime Rate (LPR), a critical benchmark for most household and business loans, remained steady at 3%, while the five-year LPR, which impacts mortgage rates, stayed unchanged at 3.5%. Externally, the yuan's depreciation was partly attributed to a stronger US dollar as markets anticipated the Federal Reserve's upcoming annual Jackson Hole symposium this week. Investors are keenly observing for any indications that the Fed could counter current market expectations of an interest rate cut as soon as next month. Currently, markets are forecasting an 84% likelihood of a rate cut, with around 54 basis points of easing anticipated by the year’s end.