Yuan Eases After US Tariff Deal, But Exports Seen Keeping It Firm
China's yuan weakened slightly against the dollar as markets shifted attention to economic imbalances after a US-China tariff reduction deal, though strong exports are expected to support the currency.
China's yuan edged lower against the dollar on Monday as attention returned to domestic economic fundamentals following President Xi Jinping's three-day visit to Washington, even as analysts maintained that robust exports will keep the currency on an appreciating path.
The onshore yuan traded at 6.7142 per dollar in late-morning trade, down 0.03% from the previous session's close. The offshore yuan stood at 6.7169. The dollar index firmed slightly to 101.09, hovering near a two-month high.
The United States and China agreed to cut tariffs on $30 billion of goods in each direction and to open a dialogue on artificial intelligence, outcomes that followed Xi's visit. Analysts said the tariff reduction should help Chinese exports remain strong through the fourth quarter, providing a floor for the yuan.
"Following the meeting between Chinese and US leaders, trade and geopolitical factors have receded to the background, at least for now," Huatai Futures said in a report, adding that the yuan "remains on an appreciation path, but with a slower upward slope."
COFCO Futures echoed that view, saying the tariff agreement would likely keep exports firm and support the currency in the final quarter of the year. The brokerage, however, flagged risks from a further widening in the US-China yield spread and shifts in external demand.
Huatai also noted that the dollar is drawing support from inflation expectations and rising interest rates. While the yuan has become less sensitive to dollar strength, climbing US Treasury yields are expected to restrain its appreciation.
Separately, data released on Monday showed China's industrial profit growth slowed further in August, underscoring deepening economic imbalances.
The People's Bank of China said last Thursday that it would stabilise market expectations and guard against herd behaviour. Ahead of the market open, the central bank set the yuan's midpoint at 6.7399 per dollar, the strongest fixing since February 3, 2023.