SHANGHAI: China’s yuan inched higher from a three-week low against the dollar on Monday, as markets awaited clarity from US President Donald Trump’s reciprocal tariff plan with some economists expecting limited impact on the world’s second-biggest economy.
Developments in trade relations with the United States have been front and centre of investors’ minds. Trump said on Sunday that all countries will be slapped with a new round of reciprocal duties due on Wednesday.
“We assess reciprocal or sectoral tariffs could be less relevant for China but still see an escalation of US-China trade disputes following the America First Trade Policy review,” Citi analysts said in a note.
“We pencil in another 10-20% tariff hike, before a Phase-Two deal, which could lead to a partial tariff rollback.”
Goldman Sachs analysts also said they don’t expect a “major” reciprocal tariff announcement targeting China.
“We also estimate minimal growth drag from other product-level tariffs … That said, a separate potential 25-percentage-point tariff on all goods from countries importing Venezuelan oil poses a risk for China,” said Xinquan Chen, China economist at Goldman Sachs.
As of 0340 GMT, the onshore yuan was 0.13% higher at 7.2534 per dollar, compared with a three-week low of 7.2693 hit last week.
Its offshore counterpart traded at 7.2588 yuan per dollar, up about 0.17% in Asian trade.
“Chinese exports to the United States had already been levied with high tariffs,” said a trader at a foreign bank, adding that markets were still anxiously waiting for more clarity on US tariffs.
Yuan hovers near 3-week low
Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1782 per dollar, and 811 pips firmer than a Reuters’ estimate of 7.2593.
The central bank has set its official guidance on the firmer side of market projections since mid-November, which analysts and traders see as a sign of unease over the yuan’s decline.
On the data front, markets showed little reaction to a strong March manufacturing survey.
“I think the manufacturing sector faces downside risk in Q2 as the external demand weakens, driven by the tariffs and the economic slowdown in the U.S,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management.
“The big question is how much export growth will decline, and how quickly the fiscal spending will pick up to offset weaker exports.”
American Dollar Exchange Rate