RBA cuts interest rates to two-year low

The Chinese yuan fell in Asian trade on Tuesday against a basket of major rivals, extending losses against the dollar for the third straight session and plumbing a week low, after the decision by the People’s Bank of China to cut interest rates for the first time in 2025.

The decision is in line with expectations as the Chinese authorities seek to ease the monetary policies and protect the economy from the impact of US tariffs.

The Price

The US dollar rose 0.2% on the yuan to 7.2260, the highest since May 12, with a session-low at 7.2093.

The yuan closed down 0.1% on the dollar on Monday following weak Chinese retail sales data.

China’s Central Bank

The People’s Bank of China voted to cut one-year borrowing costs by 10 basis points to 3.0%, the first such cut since October 2024, while cutting five-year borrowing rates by 10 basis points to 3.5%.

Major government banks also cut interest rates on deposits amid attempts to prop up the economy amid a tense trade environment. 

The banks cut the short-term deposit rate by 5 basis points to 0.05%, and cut the one-year rate by 15 basis points to 0.95%.

However, economists continue to doubt China’s ability to achieve the 5% growth target amid the heavy challenges facing its economy this year.

The sentiment did improve somewhat in recent days after Beijing and Washington agreed to pause most tariffs for 90 days as they discuss a potential trade agreement.