Yuan surges to 1-1/2 month high after Trump’s China comments, set for best week since July

SHANGHAI: China’s yuan surged to a 1-1/2-month high against the dollar on Friday and looked set for the best weekly performance since July, supported by US President Donald Trump’s suggestion that tariffs on China might be avoided.

In an interview with Fox News that aired on Thursday evening US time, Trump said his recent conversation with Chinese President Xi Jinping was “friendly”, and he would rather not have to use tariffs against China, though he called them a “tremendous power”.

“It went fine. It was a good, friendly conversation,” Trump said.

His tariff threats have been one of the key factors weighing on Chinese assets and market sentiment over the past few months.

During Trump’s first term as president, the yuan lost more than 12% against the dollar during a series of tit-for-tat US-Sino tariff announcements between March 2018 and May 2020.

“Trump continues to take a softer approach with China at this point after issuing the executive order to delay the ban on TikTok and suggesting a mere 10% tariff earlier this week,” Maybank analysts said in a note.

“His latest comments on ‘rather not have to use tariffs on China’ suggest his reluctance to do so and markets are likely to reduce bets on tariffs right now.”

However, they said tariffs on Chinese exports were still likely and key dates to watch included Feb. 1 and April 1.

Chinese financial markets will be closed for the week-long Lunar New Year holiday from Jan. 28.

China’s yuan slips on worries over Trump tariff plans, pre-holiday dollar demand

On Friday, the onshore yuan surged to a high of 7.2450 per dollar, the strongest level since Dec. 11, before trading at 7.2474 per dollar as of 0300 GMT.

If the spot rate finishes the late-night session at the midday level, it would have gained 1.1% against the greenback for the week to record the biggest weekly rise since July 2024.

Its offshore counterpart followed the strengthening trend and surged to a 1-1/2-month high of 7.2519 before trading at 7.2535 as of 0300 GMT.

Prior to the 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 7.1705 per dollar, and 1,074 pips firmer than a Reuters’ estimate of 7.2779.

Trump’s comments “had a huge impact on market sentiment,” said a trader at a foreign bank.