Yuan steady as markets eye Middle East tensions and China inflation

SHANGHAI: China’s yuan was little changed against the dollar on Thursday as investors fret about the risk of a prolonged Iran war, with some analysts noting that yuan strength is expected to persist ahead of a visit from US President Donald Trump.

Market participants are also awaiting domestic inflation data due on Friday.

Onshore yuan opened at 6.8350 per dollar and last traded at 6.8335 as of 0225 GMT, 25 pips firmer than the previous late session close.

The yuan touched its highest level in more than three years on Wednesday after US President Donald Trump agreed a two-week ceasefire with Iran.

“The truce is fragile with Iran complaining that ceasefire terms have been violated given ongoing Israeli attacks in Lebanon, while shipping in the Strait of Hormuz has also not been given an all clear,” said Chang Wei Liang, a currency and credit strategist at DBS.

 US ?President Donald Trump told AFP on Tuesday that he believes China got ?Iran to negotiate a ceasefire ?in the war against Israel and ?the United States.

That might augur well for US-China relations.

“Trump is now looking forward to visiting China in just a few weeks, and the RMB is likely to be kept strong ahead of his visit,” Chang said.

The yuan has climbed 2.3% this year on the back of booming exports.

Prior to the market opening, the People’s Bank of China set the midpoint rate at 6.8649 per dollar. Although the fix was its strongest since April 14, 2023, it was 334 pips weaker than a Reuters’ estimate, the widest gap in a month, suggesting authorities may not want a sharp rally in the yuan.

The dollar index, which measures the greenback against a basket of six currencies, steadied on Thursday after hitting a one-month low.  China’s first-quarter inflation print due on Friday may provide clues to yuan sentiment.

China is likely to exit deflation sooner than markets expect, with PPI, CPI and the GDP deflator all seen turning positive year-on-year in the first quarter, Xing Zhaopeng, senior China strategist at ANZ, said in a note.

 Offshore yuan traded at 6.8337 yuan per dollar, down about 0.01% in Asian trade.