Dollar loses ground as Fed cut bets rise; yuan slides after PBOC

The dollar ebbed on Monday as investors revived their bets of early rate cuts by the Federal Reserve, while the yuan fell to a one-month low after China’s central bank surprised markets by keeping its medium-term policy rate steady, Reuters reported.

The People’s Bank of China (PBOC) left interest rates unchanged when rolling over maturing medium-term policy loans, defying market expectations for a cut to shore up China’s bumpy post-pandemic economic recovery.

That sent the onshore yuan sliding to a one-month low of 7.1813 per dollar, while its offshore counterpart fell as far as 7.1906 per dollar, languishing near Friday’s one-month trough.

China’s fourth-quarter gross domestic product (GDP), December industrial production, retail sales and unemployment rate are among the key economic indicators out on Wednesday, which are likely to provide further clarity on the outlook for the world’s second-largest economy.

In the broader market, traders also have their eye on a reading on UK inflation due later in the week, as the market focus remains on how soon major central banks globally could begin easing rates this year.

Sterling slipped 0.1% to $1.2730, though it remained close to a two-week peak hit last week.

The euro hovered near the $1.10 mark and was last 0.13% higher at $1.0964. The dollar index dipped 0.1% to 102.30, having drifted largely sideways the past couple of sessions.