The Chinese yuan has strengthened against the US dollar since June 3, as the disappointing US non-farm payrolls growth in May killed off expectations on the Fed’s rate hike in June.

The news on the weak employment condition in the United States has reversed the yuan’s previous depreciation versus the dollar. Yuan’s midpoint versus the greenback was fixed nearly 300 pips higher this morning in the onshore interbank market, following the yuan’s biggest daily gain in two months and a stumble of the US Dollar Index last Friday. In the meantime, the offshore yuan once broke 6.55 against the dollar during the New York trade session last Friday, marking the largest appreciation in five months.

The shorts on the yuan vs dollar would become more cautious recently, according to Sacha Tihanyi, senior forex strategist with TD securities. Amid a rather gloomy outlook on the US labor market, clues on the Fed’s future moves may be provided, shedding light on the trend of exchange rates between the two currencies.

Even though market participants had expected that the US Fed would raise interest rates in June, job growth slowed significantly in May, with non-farm payrolls rising only 38,000 and way behind an estimate of 160,000. The disappointment, combined with the downward revisions on previous job growth figures in March and April, has dampened the hopes for a rate hike in the US this month.

“The US Fed is unlikely to raise interest rates in June or July this year, if it sticks to the data-dependent policy,” said Zhang Jun, chief economist at the Morgan Stanley Huaxin Securities, as quoted by China Business News on June 4. Other foreign analysts believe that the rate hike may be postponed until this September, with the odds of hikes in June sharply falling from 22% to 4%.