HONG KONG: China’s yuan firmly slightly against the U.S. dollar on Wednesday after high-stakes trade talks ended on a positive note, with investors attention now turning to the Politburo meeting and the Federal Reserve’s rate decision.
Top U.S. and Chinese officials agreed on Tuesday to seek an extension of their 90-day tariff truce, following two days of what both sides described as constructive talks.
Investors are now focused on the expected end-July meeting of China’s Politburo, hoping Beijing may unveil new measures to support growth in the second half of the year.
Markets are also closely awaiting the Federal Reserve meeting due later on Wednesday, which could offer fresh guidance on the rates trajectory despite expectations for a hold.
By 0310 GMT, the yuan was 0.04% higher at 7.1747 to the dollar, recovering from a one-week low.
Its offshore counterpart traded at 7.1775 yuan per dollar , up about 0.05% in Asian trade.
“There’s no need to worry about U.S.–China negotiations for now” and further escalations are unlikely ahead of a potential meeting between the two countries’ leaders, Zhongtai Securities analysts said in a note.
The yuan has been relatively steady so far in July after two straight months of gain as it recovered from U.S. tariff shocks in April.
Better-than-expected economic data and a trade war détente have helped buoy China sentiment, which could reinforce the bullish case for Asia FX, analysts at Bank of America said in a note.
Prior to the market opening on Wednesday, the People’s Bank of China set the midpoint rate at 7.1441 per dollar, 301 pips firmer than a Reuters’ estimate.
The spot yuan is allowed to trade 2% either side of the fixed midpoint each day. Based on Wednesday’s official guidance, the yuan is allowed to drop as far as 7.2870.
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