Yuan set for flat week as oil-led dollar strength caps gains

HONG KONG: China’s yuan traded in a narrow range against the US dollar on Friday as investors grappled with renewed concerns over hostilities in the Middle East and rising oil prices.

 The dollar rode US Treasury yields higher on Friday after US President Donald Trump threatened “major military punishment” for Iran and its Houthi allies.

Brent crude climbed back above $100 a barrel for the first time since May.

Analysts said a surge in oil prices has led markets to increasingly price in a US rate hike, lending support to the dollar and slowing the yuan’s appreciation.

The yuan was roughly flat at 6.7753 to the dollar as of 0241 GMT, after trading in a range of 6.7736 to 6.7767.

The currency was on track for a broadly unchanged week.

The offshore yuan fetched 6.7765 yuan per dollar, largely unchanged in Asian trade.

Prior to the market opening, the People’s Bank of China set the midpoint rate at 6.7939 per dollar, 144 pips weaker than a Reuters’ estimate.

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

Tariff concerns are also keeping traders on edge. The Trump administration on Friday will impose new tariffs of 10% and 12.5% on goods from 60 trading partners, including China, over allegations of lax enforcement of forced labor bans.

“The macro backdrop has become more challenging… Higher oil prices, persistent geopolitical uncertainty, fragile equity market sentiment and renewed capital outflow pressures have all strengthened the case for protecting CNY exposure,” said Wee Khoon Chong, APAC macro strategist at BNY, suggesting traders should hedge their yuan positions.

 The yuan is 3.2% firmer this year, backed by the robust export growth. But the pace of appreciation has been subdued this month as the dollar strengthens and data on China’s economic growth disappointed.

 Domestically, investors are awaiting next week’s Politburo meeting for economic policy signals, Nanhua Futures analysts said in a note.

Separately, in its latest report, US Treasury finds no trading partner manipulated currency for trade advantage in 2025, including China.

The dollar’s six-currency index was last at 101.37.