(Yicai Global) July 13 -- The Chinese yuan strengthened against the US dollar yesterday after the latest data revealed that US inflation has significantly cooled. The slide of the yuan against the dollar should start to reverse soon, the wealth management arm of Swiss banking giant UBS said today.

Both the onshore and offshore yuan appreciated past 7.2 to the greenback yesterday. As of 11.50 a.m. China time today, the onshore rate was at 7.1693 and the offshore rate 7.1723.

The US consumer price index, a gauge of inflation, came in at 3 percent in June, the lowest year-on-year increase since March, according to the latest data released by the US Department of Labor yesterday. The core CPI, which does not include food and energy prices, was 4.8 percent, the lowest since November 2021.

The redback has been under pressure since the beginning of the year due to the US Federal Reserve’s constant interest rate hikes, UBS Wealth Management’s Chief Investment Office said in a report issued today. At one point it sank to around 7.3 to the US dollar. However, now that the rate hikes are ending, the trend is expected to reverse in the second half.

Since the end of last month, the yuan-dollar central parity rate set by the People’s Bank of China has been below market expectations and the US treasury yield has shown signs of a sideways trend, Zurich-based UBS Wealth Management said.

The yuan stopped weakening once it reached around 7.2 and 7.3 to the US dollar and it likely to appreciate back to 6.9 before the end of the year, it added.

As US economic growth slows, the Federal Reserve will probably stop hiking rates in the next few months and even begin to trim them next year, it added.

Editors: Lv Yining, Kim Taylor