(Yicai Global) Nov. 14 -- The Chinese yuan strengthened 1008 price interest points against the US dollar today as the US dollar index continues to slide following heightened anticipation that the US central bank will slow the hiking of interest rates after inflation fell short of market expectations last month. There is not much space for further appreciation of the greenback, analysts say.

The redback was trading at 7.0899 against the dollar today. It has made substantial gains since Nov. 10 when the US Department of Labor said that the consumer price index, a gauge of consumer inflation, grew at the slowest pace since January in October, triggering the biggest one-day drop in the US dollar index since 2015. On Nov. 11, it continued to tumble, slumping a further 1.7 percent to 106.26. Over the two days, the index slid a cumulative 3 percent, the biggest two-day drop since March 2009.

There is limited upward space for the US dollar index and depreciation pressure on the yuan against the dollar will be reduced, said Wen Bin, chief economist at Minsheng Bank.

US stocks and gold prices have soared since the announcement, while the US dollar index and US bond yields have plunged. This is more likely due to less policy uncertainty, rather than an expectation of a slowdown in rate increases, said Wen.

“The Fed is likely to slow down the pace of interest rate hikes and the pressure on the yuan will weaken further,” said Zhou Maohua, macro researcher in the financial market department of China Everbright Bank. The market is also more optimistic about China’s economic recovery, driving capital inflows.

Today the People’s Bank of China kept the rate on CNY5 billion (USD709 million) of seven-day reverse repos unchanged at 2 percent.

Editor: Kim Taylor