SHANGHAI: China’s yuan touched a one-month low against the U.S. dollar in early trade on Monday but reversed most of its loss by midday, as investors awaited details from tariff talks as well as from the Politburo’s July meeting to gauge the currency’s direction.
Chinese and U.S. officials will resume tariff talks in Stockholm on Monday to tackle economic disputes at the centre of their trade war, with the aim of extending a truce by three months and keeping sharply higher U.S. tariffs at bay.
“Considering the recent tariff announcements - 15% for US allies, 20% for ASEAN countries, and 40% for transshipping goods - there is limited scope for substantial tariff reductions in the Stockholm negotiations,” said analyst Liang Ding at researcher Macro Hive.
The onshore yuan touched 7.1897 a dollar shortly after market open, its lowest since June 23.
Ding said the yuan has been supported over the past week by a robust equity market and strong central bank fixes - the point around which the bank allows the yuan to trade.
Still, the yuan could face renewed pressure as trade flows are set to become less favourable for non-U.S. countries in the coming months as U.S. tariff uncertainty dissipates and the “sell U.S.” narrative may lose momentum, Ding said.
The spot yuan opened at 7.1670 a dollar and last traded at 7.169 as of 0312 GMT, 10 pips lower than the previous late session close and 0.31% weaker than the midpoint.
Prior to market open, the People’s Bank of China set its midpoint rate at 7.1467 a dollar, 186 pips firmer than a Reuters’ estimate.
The PBOC allows spot yuan to trade 2% either side of the midpoint each day.
Domestically, investors are awaiting details of the July Politburo meeting as well as manufacturing activity data due this week.
“We think the government is likely to keep a supportive macro policy tone, but the urgency and likelihood of rolling out major additional stimulus measures are low, given the robust Q2 GDP growth,” said UBS economists in a client note.
The government may elaborate on efforts to curb involution competition, discuss measures to stabilise the housing market, and offer preliminary information about its new five-year plan, they said.
The offshore yuan traded at 7.1695 yuan a dollar, down about 0.01% in Asian trading hours.
The yuan is down 0.1% against the dollar this month but 1.8% firmer this year.
The dollar index, which measures the greenback against a basket of currencies including the euro, was 0.010% higher at 97.62.
The U.S. agreed a trade framework with the European Union on Sunday, imposing a 15% import tariff on most EU goods.
Comments
Comments are closed for this article.