China’s yuan firmed on Monday after the country’s central bank set a stronger fixing for the currency’s daily trading band, but analysts and traders said they were watching an upcoming meeting of the U.S. Federal Reserve for cues to future direction. Monday’s gains followed a seventh straight week of gains for the yuan, its longest since early 2018. Before the market opened, the People’s Bank of China (PBOC) set the yuan’s midpoint rate at 6.8361 per dollar prior to market open, firmer than the previous fix of 6.8389. Spot yuan opened at 6.8251 per dollar and inched to a top of 6.8250 before trimming gains to 6.8304 by midday, 44 pips stronger than Friday’s late session close. The offshore yuan strengthened to 6.8295 per dollar at midday, from 6.8330 on Friday. Traders did not expect any major move in the exchange rate before the outcome of the Federal Open Market Committee (FOMC) is set to meet on Tuesday and Wednesday. It is the first meeting since Fed Chair Jerome Powell pledged to keep interest rates anchored even if inflation ran above the 2per cent target for a considerable period. “We’re waiting to see the Fed’s decision … If the dollar index moves, the yuan will follow,” said a trader at a Chinese bank. The global dollar index fell to 93.204 on Monday from the previous close of 93.267, while the Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 93.45, firmer than the previous day’s 93.41. Li Liuyang, chief FX analyst at China Merchants Bank’s financial markets department said the correction in global risk assets this month and an uptick in the dollar followed an excessive risk rally, and that a rebound in global COVID-19 cases had prompted worries about the impact on the global economic recovery. But he said that if central banks maintain an environment of loose liquidity, it was unlikely that markets would see a repeat of the falls in risk assets in March. “A dollar rebound will be limited, and when the dollar starts to fall again, the yuan is likely to start a second round of appreciation,” he said. The yuan market at 4:04AM GMT: ONSHORE SPOT: Item Current Previous Change PBOC midpoint 6.8361 6.8389 0.04 per cent Spot yuan 6.8304 6.8348 0.06 per cent Divergence from -0.08 per cent midpoint* Spot change YTD 1.94 per cent Spot change since 2005 21.17 per cent revaluation Key indexes: Item Current Previous Change Thomson 93.45 93.41 0.0 Reuters/HKEX CNH index Dollar index 93.204 93.267 -0.1 *Divergence of the dollar/yuan exchange rate. A negative number indicates that spot yuan is trading stronger than the midpoint. The People’s Bank of China (PBOC) allows the exchange rate to rise or fall 2 per cent from official midpoint rate it sets each morning. OFFSHORE CNH MARKET Instrument Current Difference from onshore Offshore spot yuan 6.8295 0.01 per cent * Offshore 6.9857 -2.14 per cent non-deliverable forwards ** *Premium for offshore spot over onshore **Figure reflects difference from PBOC’s official midpoint since non-deliverable forwards are settled against the midpoint.