Yuan steady as Trump softens Greenland rhetoric and as exporters sell FX

HONG KONG: China’s yuan edged up against the US dollar on Thursday after US President Donald Trump softened his rhetoric around Greenland, while foreign-exchange settlements from exporters continued to underpin the currency’s strength.

The yuan touched a high of 6.9615 to the dollar in early trading before moving up 0.02% at 0254 GMT.

The offshore yuan traded at 6.9594 yuan per dollar, down about 0.01% in Asian trading.

“We are constructive on export outlook and expect exporters to sell more FX, underpinning further RMB strength,” analysts at Bank of America said in a note.

Meanwhile, with investors maintaining a constructive view on artificial intelligence, any foreign inflows into Chinese equities could also add more fuel to the yuan’s strength, they added.

Before the market opened, the People’s Bank of China set the midpoint rate at 7.0019 per dollar, marking a second consecutive day of weakening from a 32-month high reached earlier this week - coming in 322 pips weaker than a Reuters estimate.

The spot yuan is allowed to trade a maximum of 2% on either side of the fixed midpoint each day.

The weakening fixing is not viewed as a change in stance, but is rather a case of policymakers seeking to maintain “an orderly and measured pace of appreciation,” analysts at OCBC said in a note.

 “This approach aims to prevent markets from rushing to offload USD in a disorderly manner, thereby avoiding abrupt price fluctuations and ensuring orderly market dynamics,” they said.

“To set the fix below 7-figure is just a matter of time, and when it happens, it may further add to RMB appreciation down the road.”

 In other news, the US dollar held on to overnight gains against major peers on Thursday as Trump toned down his rhetoric surrounding Greenland. Specifically, he dropped his tariff threats and ruled out seizing Greenland by force.

The US dollar now has both bullish and bearish factors working against each other, as geopolitical concerns and Fed rate cuts weigh, while strong jobs and retail data provide support, analysts at China Merchants Bank said in a note.

“The dollar is likely stuck in a trading range, while the renminbi should remain relatively strong, supported by ongoing foreign-exchange settlements,” they added.