SHANGHAI: China’s yuan climbed to a four-month high against the dollar on Wednesday, as the greenback was hobbled by US economic worries caused by President Donald Trump’s unpredictable trade policies.
Trump reversed course on Tuesday afternoon on a pledge to double tariffs on steel and aluminum from Canada to 50%, just hours after announcing the higher tariffs, in rapid-fire moves that confused financial markets.
The dollar index edged up in early Asian trade, after dropping overnight to its lowest level since October 2024.
China’s onshore and offshore yuan both firmed to the stronger side of 7.22 per dollar in early trades, the highest levels since November 2024.
A weak dollar was helping the yuan, analysts said.
“Yuan is, ironically, in a more benign environment at this point, boosted also by a rather encouraging National People’s Congress (NPC) thus far,” said analysts at Maybank in a note.
Also helping the yuan were reports of talks between the US and China and a potential “birthday summit” in June between the leaders of the world’s two largest economies.
Still, Maybank analysts said sentiment on the yuan remains highly sensitive to any escalation in the US-China trade conflict in the near term.
China’s yuan rebounds as US dollar takes a hit
“We watch as Trump acts more concretely to limit investment flows into China, pressure other nations to enact tariffs on China,” the note said.
The spot yuan opened at 7.2250 per dollar and was last trading 7 pips firmer than the previous late session close at 7.2268 as of 0327 GMT, 0.8% weaker than the midpoint.
Prior to the market opening, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1696 per dollar, 628 pips firmer than a Reuters’ estimate.
Analysts at HSBC maintained their year-end forecast for the onshore yuan against the dollar at 7.40.
“It is notable that the only US tariffs that have not been delayed or alleviated in some way are those imposed on China,” HSBC analysts said in a note, adding that tariff-induced depreciation pressure for the yuan is still high.
The offshore yuan traded at 7.2284 yuan per dollar, down about 0.01% in Asian trade.
The dollar index, which measures the currency against a basket of six major peers, was 0.087% higher at 103.54.
