China’s yuan steady against dollar amid Iran ceasefire uncertainty

SHANGHAI: China’s yuan held steady against the dollar on Monday, as markets await a political resolution to the Iran war, even as rising tensions over the weekend put the ceasefire in doubt.

The dollar recovered on growing uncertainty over potential talks between the United States and Iran, but analysts said the yuan was set to strengthen over the long run supported by China’s economic resilience and wariness toward the greenback.

The onshore yuan changed hands at 6.8191 per dollar around midday, barely changed from the previous session’s close.

The dollar index rose slightly as concerns grew on Monday that the ceasefire between the United States and Iran might not hold after the US said it had seized an Iranian cargo ship that tried to run its blockade and Iran vowed to retaliate.

Tehran also said it would not take part in a second round of negotiations that the US had hoped to kick off before its two-week ceasefire with Iran expires on Tuesday.

“The market appears unwilling to pay extra risk premiums for the US-Iran talks. Each dollar rebound triggered by geopolitical risks is becoming weaker and weaker,” Huatai Futures said in a report.

The brokerage said that the market is focused on whether the ceasefire will be extended beyond the April 22 deadline and the direction of US monetary policy.

“If the ceasefire holds, and oil prices fall back further, rate cut expectations could be revived,” a scenario bad for the dollar, Huatai Futures said.

Nanhua Futures said that geopolitical uncertainty around the Middle East conflict means the yuan will likely fluctuate between 6.78-6.85 per dollar.

“But the yuan’s long-term upward trend is certain,” supported by China’s robust exports and limited exposure to oil price shocks.

Huatai Futures agreed that China’s 5% GDP growth in the first quarter reflects the country’s economic resilience, while US growth is losing momentum, so “economic expectations lean towards a stronger yuan.”