SHANGHAI: China’s yuan fell to a two-week low against the US dollar on Tuesday, as the central bank’s support efforts were overshadowed by the dollar’s strength and tariff concerns ahead of President Donald Trump’s looming deadline.
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 7.1788 per dollar, 842 pips firmer than a Reuters’ estimate.
This marked the largest gap in two weeks, suggesting the central bank’s attempts to tighten control over the weakening currency. Still, the onshore yuan dropped to a low of 7.2650 per dollar, its weakest since March 10.
The offshore yuan fell for the sixth straight day, reaching a low of 7.2703 per dollar, marking its longest losing streak since October.
“The currency has been bounced between positive and negative trade headlines in the past 24 hours.
It missed the risk rally which followed reports of Trump’s reciprocal tariffs to be more targeted,“ said analysts at Citi in a note.
Trump said on Monday that not all of his threatened levies would be imposed on April 2 and some countries may get breaks.
The dollar index hit a three-week high on Tuesday after some strong US services data and cautious optimism on the tariff front.
Spot yuan opened at 7.2620 and was last trading at 7.2637 as of 0247 GMT, 32 pips lower than the previous late session close and 1.18% weaker than the midpoint.
Yuan hits two-week low against dollar
“USD longs building up as seen in USD/JPY’s climb above 150 will also add upward pressure on the USD/CNH in near term. A gauge of one-month call options over puts indicate bearish bets on RMB (are) growing in the run up to the April 2 announcement,” said Citi analysts.
Meanwhile, the PBOC said on Monday it will change the way it sells its medium-term loans, a move that market participants say may further erode the significance of the role of such a bond instrument in guiding monetary policy.
The central bank is expected to inject 63 billion yuan ($8.68 billion) on a net basis into the market on Tuesday.
China’s sovereign bond yields were broadly down, with 10-year yields dropping below 1.8%.
The dollar index, which measures the greenback’s value versus six major currencies, was 0.038% higher at 104.34.
The offshore yuan traded at 7.2701 yuan per dollar, down about 0.07% in Asian trade.
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