U.S. Treasury Secretary Steve Mnuchin said on Tuesday he expected to see significant progress in trade talks with Chinese officials and that U.S. charges against telecommunications giant Huawei Technologies Co Ltd were a separate issue.
The comments eased some market worries about the potential for the Huawei case to impact the trade negatiations. Mnuchin's earlier comment that the currency issue would be on the agenda for the talks also improved sentiment toward the yuan, as the
United States does not want to see a weak yuan giving Chinese exports a competitive advantage.
Frances Cheung, head of macro strategy for Asia at Westpac, doubted whether the talks would result in "anything explicit" regard the yuan's trend.
Market participants believe that a stronger yuan would at least create a better atmosphere for the trade talks, and
Chinese authorities usually want a more stable currency during key events.
Economists at ING were skeptical over ghow much progress could be expected from this week's talks.
"But chances are that protectionism will get worse before it gets better. U.S. demands are too ambitious for quick fixes," they said in a note on Wednesday. Prior to market opening on Wednesday, the People's Bank of China (PBOC) set the midpoint rate at 6.7343 per dollar, 13 pips firmer than the previous fix of 6.7356.
In the spot market, the onshore yuan opened at 6.7275 per dollar, quickly breached the 200-day moving average of 6.72 to a high of 6.7135 at one point in morning trade, the strongest since July 18, 2018.
As of 0314 GMT, the onshore spot yuan was trading at 6.7144, 176 pips firmer than the previous late session close and 0.30 percent stronger than the midpoint.
While yuan traders were also awaiting the outcome of the U.S. Federal Reserve's two-day policy meeting later in the day, to gauge whether the its monetary tightening would be slowed this year.
The global dollar index fell to 95.754 as of 0314 GMT, from the previous close of 95.821. The offshore yuan was trading at 6.73 per dollar at 0314 GMT.