Yuan Eases as Fed Rate Bets Lift Dollar; Markets Eye Trump-Xi Talks
China's yuan weakened against a firmer dollar as markets awaited the Trump-Xi summit and digested a trade-truce extension through January 10.
China's yuan edged lower against the dollar on Thursday, pressured by a firmer greenback as investors positioned for near-term Federal Reserve rate increases while watching the outcome of the Trump-Xi summit in Washington.
The dollar climbed overnight to its strongest level in almost two months, with benchmark 10-year Treasury yields touching their highest since 2007. Analysts said rising US yields and expectations of Fed tightening have underpinned the dollar while adding to pressure on the yuan and other Asian currencies.
In onshore trade, the spot yuan was 0.09% weaker at 6.7171 per dollar, moving between 6.7141 and 6.7195. Ahead of the open, the People's Bank of China fixed the midpoint at 6.7489 per dollar, 305 pips weaker than a market estimate. The spot rate may trade up to 2% on either side of the daily fixing.
Offshore, the yuan stood at 6.7182 per dollar, also down about 0.09% during Asian hours, while the dollar index held at 101.15.
US President Donald Trump welcomed Chinese President Xi Jinping to Washington on Wednesday for a three-day visit. Treasury Secretary Scott Bessent said the two sides agreed to extend their trade truce through January 10 — a two-month rollover that is shorter than markets had anticipated.
With deep differences persisting over trade and technology, market participants are keeping expectations low and foresee limited deliverables from the talks. Kaiyuan Securities noted that the yuan's recent rally to a three-and-a-half-year high suggests markets have already partly priced in a stabilisation in US-China relations, adding that attention now turns to whether there are fresh developments on tariffs, technology and other areas.
Separately, the central bank said on Wednesday it would inject up to 1 trillion yuan ($149 billion) a day through short-term liquidity tools around the turn of the month as the Golden Week holiday approaches. OCBC strategists expect the yuan to remain within familiar ranges, noting that upcoming Chinese holidays could thin out liquidity.