SHANGHAI: China’s yuan firmed against the US dollar on Friday, underpinned by a broadly weaker greenback and improved sentiment following a Sino-US tariff truce, as traders kept a close eye on the daily fixing for clues on Beijing’s currency stance.
The dollar fell in tandem with US Treasury yields on Friday after downside surprises on US economic data this week cemented bets of more Federal Reserve rate cuts this year.
Also supporting yuan sentiment, a slew of investment banks including Citi and UBS raised their China GDP forecasts for 2025 after the world’s two largest countries agreed to a 90-day deal to slash reciprocal tariffs in a substantial de-escalation of a potentially damaging trade war.
Yuan wobbles near 2-week low on tariff, growth concerns
“Buoyed by market optimism driven by tariff developments, the yuan may remain strong against the US dollar for much of the time in the short term,” said analysts at Nanhua Futures.
But once the sentiment fades, the yuan is likely to resume two-way fluctuations, they said.
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 7.1938 per dollar, 147 pips firmer than a Reuters’ estimate.
The PBOC has set the yuan’s daily fixings much closer to Reuters estimates this week than in the past six months, significantly narrowing the gap — a move viewed as an effort to avoid rapid gains in the currency.
Lemon Zhang, a strategist at Barclays, said the fixes suggested the PBOC was trying to avoid a repeat of the recent sharp moves seen in the Taiwan dollar.
Bullish bets on the Taiwan dollar surged to their highest since late 2020 after the currency posted its steepest one-day gain in nearly four decades last week, as traders wagered Taipei might permit appreciation to smooth trade relations with Washington.
The spot yuan opened at 7.2037 per dollar and was last trading at 7.2020 as of 0259 GMT, 47 pips firmer than the previous late session close and 0.11% weaker than the midpoint.
Zhang estimated that as much as $100 billion in corporate conversion flows from exporters could be triggered if the offshore yuan strengthens beyond the 7.10–7.15 range, a move she said could pave the way for a rapid shift toward 7.00.
The offshore yuan traded at 7.1992 yuan per dollar, up about 0.09% in Asian trade.
The dollar’s six-currency index was 0.099% lower at 100.67.
American Dollar Exchange Rate