SHANGHAI: China’s yuan slipped against the dollar on Thursday, as market participants closely monitored trade negotiations between the United States and other countries on what they might mean for the world’s second-largest economy.
US President Donald Trump said on Wednesday that the United States had struck a trade deal with Vietnam, with the 90-day pause on duties on imports from dozens of countries set to expire on July 9.
China and the US reached a trade framework to ease escalating tariffs in June following a phone call between Trump and Chinese President Xi Jinping.
“While the US-China agreement marks a significant de-escalation with both nations previously imposing sweeping tariffs and non-tariff barriers, we should not forget that the effective tariff rate for goods entering the US from China still stands at 55%,” Inga Fechner, senior economist for global trade at ING, said in a note.
“Additionally, several anti-dumping countermeasures are in place. Tensions remain high as China voices strong discontent over other countries entering trade agreements with the US, which it considers to be undermining its interests.”
As of 0316 GMT, the onshore yuan was 0.03% lower at 7.1643 per dollar, while its offshore counterpart traded at 7.1611.
Some currency traders pointed out that loose yuan liquidity conditions in both onshore and offshore markets also weighed on the Chinese currency.
The CNH Hong Kong Interbank Offered Rate benchmark (CNH HIBOR), a gauge that measures the yuan’s cost of borrowing in the financial hub, fell across the board on Thursday.
Its one-year tenor hit the lowest level on record.
The volume-weighted average rate of the benchmark overnight and seven-day repo traded in the onshore interbank market, fell to levels last seen in 2023.
Yuan near 8-month high
Despite the slight weakness on Thursday, the yuan has strengthened about 1.5% against the US dollar since April, when Trump rolled out his so-called reciprocal tariffs, compared with sharp rallies seen in other emerging market currencies.
“There is a delicate balance that yuan stability is achieving – an environment that is positive for foreign investors, predictable for importers and exporters and it provides little room for yuan speculation,” Maybank analysts said in a note.
Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate at 7.1523 per dollar, its strongest since November 8, 2024, and 95 pips firmer than a Reuters’ estimate of 7.1618.
The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
