Yuan Declines as US Signals Tariff Reduction Willingness

HONG KONG: The Chinese yuan experienced a decrease against the US dollar on Thursday. This shift occurred as the United States government suggested a potential reduction in tariffs on Chinese goods, which in turn prompted a recovery of the dollar overnight.

The US currency gained momentum following remarks on Wednesday by US Treasury Secretary, who stated that tariffs exceeding 100% between the US and China were unsustainable. These remarks coincided with reports indicating the Trump administration’s consideration of easing tariffs on Chinese products, contingent upon discussions with Beijing.

President Trump informed reporters, “We anticipate reaching a fair agreement with China,” although he did not provide specific details.

By 0415 GMT, the yuan had depreciated by 0.15%, reaching 7.2992 against the dollar, fluctuating between 7.2900 and 7.3022. Its offshore equivalent traded at 7.2999 yuan per dollar, marking a decrease of roughly 0.19% during Asian trading hours.

Nanhua Futures indicated in a note that the reduced pressure on exchange rates resulting from tariff-related news diminishes the likelihood of a rapid decline in the yuan’s value.

They projected, “We anticipate the yuan to fluctuate around 7.30 throughout this week.”

Before the market commenced, the People’s Bank of China established the midpoint rate, which allows the yuan to fluctuate within a 2% range, at 7.2098 per dollar, a level 1,013 pips stronger than a Reuters’ estimation.

Concurrently, China is increasing its efforts to promote the use of its currency in international commerce, amidst trade tensions with the US.

A senior official from China’s central bank announced on Wednesday that the country’s initiative to streamline cross-border financial services will facilitate greater global adoption of the yuan.

Earlier in the week, the central bank released a plan encouraging state-owned enterprises to prioritize the use of the yuan for payments and settlements as they expand their international operations.

The dollar’s index, which tracks it against six other currencies, was down by 0.105% at 99.68.