Hong Kong: A sign of easing trade tensions between the United States and China prompted a reversal overnight in the dollar, whose strength weighed slightly upon the yuan. At 0415 GMT, the onshore yuan traded at 7.2992 per dollar, down 0.15%, while the offshore yuan in Asian trading was at about 7.2999, down around 0.19%.
The dollar gained some strength after Treasury Secretary Scott Bessent stated that the current level of tariffs between the two economies was already unsustainable. This was accompanied by reports suggesting that the Trump administration was considering lowering tariffs on Chinese goods ahead of fresh trade talks.
President Donald Trump then mentioned a "fair deal with China" as a goal but provided no details. Markets reacted positively to these comments, easing immediate concerns about escalation and enhancing sentiment.
The PBOC reacted by fixing the reference rate for the yuan at 7.2098 per dollar, more than a thousand pips stronger from Reuters' estimates, in what was clearly an attempt to maintain stability amid changing trade conditions.
Analysts at Nanhua Futures pointed out that easing tensions regarding tariffs minimize the risks of abrupt yuan depreciation and foresee edge-wise the yuan maintaining 7.30 in the near term, whereas the promotion of international usage of the yuan, especially among state enterprises, is an integral part of China's larger agenda of enhancing its global financial clout.
This subtle move in the currency reflects the fine balance being observed during trade negotiations, as currency policies are being modified in response to shifting geopolitical and economic environments.
[Source Credit: Business Recorder]
