China's yuan holds steady as robust trade data offsets fresh Mideast jitters

HONG KONG/SHANGHAI: China’s yuan held steady against the dollar on Tuesday, as fresh signs of escalating Middle East tensions were offset by robust trade data that helped stabilise market sentiment.

The US military carried out a third consecutive night of strikes against Iran on Monday as President Donald Trump reinstated a blockade of Iranian shipping and proposed charging a 20% fee to guard the Strait of Hormuz.

Currency traders said China’s import and export data came in significantly better than market expectations, helping offset the impact of a broadly stronger greenback.

China’s exports surged in June, buoyed by demand for chips and data centre computing power to fuel the AI boom, giving policymakers grappling with how to boost domestic demand in the world’s second-largest economy a much-needed buffer.

The onshore yuan traded at 6.7820 per dollar at midday, 3 pips weaker than the previous late night close.

And its offshore counterpart last fetched 6.7833 per dollar. Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate at 6.7990 per dollar, 18 pips softer than the previous setting of 6.7972.

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

The central bank has been setting weaker-than-expected midpoint guidance rate since November 2025, a move investors interpreted as an attempt to keep market stable and prevent excess yuan gains.

The gap between the official setting and market projection

 has effectively narrowed in recent sessions.

Tuesday’s official fix was 63 pips weaker than a Reuters’ estimate of 6.7927, compared with a high of 544 pips in estimate error seen in mid-June.

“China has proven to have been more resilient than expected to the developments of the Gulf War … PBOC is comfortable with allowing the yuan to strengthen further against the US dollar,” Maybank analysts said in a note.

“The PBOC is easing up on its control over the yuan given that yuan appreciation pace has slowed.

It is no longer the outperformer against most G10 and Asian currencies as it was in the first half of 2026.“

The yuan has strengthened 3% against the dollar so far this year, slightly short of a 3.85% gain in Australian dollar during the same period.

Separately, market participants were anxiously awaiting second-quarter gross domestic product (GDP) and other activity indicators due on Wednesday that could offer a clearer picture of the wider economy.

“Several key economic data points will be released domestically, and it is necessary to verify whether the economic fundamentals continue the marginal improvement trend reflected in the PMI data,” Nanhua Futures analysts said in a note.

Chinese Premier Li Qiang called on Monday for “a comprehensive and objective understanding” of the current economic situation and for a stronger counter-cyclical adjustment, state broadcaster CCTV reported.

In global markets, investors also looked out for US inflation data due later in the session for more clues on the Federal Reserve’s monetary policy trajectory.

Inflation risks remain in the spotlight with the release of US June CPI data on Tuesday, June PPI gauges the following day, and Fed Chair Kevin Warsh’s first semiannual testimony before Congress.