China’s yuan weakened against the US dollar on Thursday as expectations of a near-term Federal Reserve rate hike lifted the greenback, while investors awaited the outcome of US President Donald Trump’s meeting with Chinese President Xi Jinping in Washington.
The spot yuan was down 0.09% at 6.7171 per dollar as of 0224 GMT, after trading between 6.7141 and 6.7195. The People’s Bank of China set the yuan’s midpoint rate at 6.7489 per dollar before the market opened, 305 pips weaker than a Reuters estimate.
Read more: Global Market Today: Asian stocks waver on inflation, rate concerns
The yuan is permitted to trade within a 2% range on either side of the daily midpoint.
The dollar climbed to its highest level in nearly two months overnight as expectations of a near-term Fed rate increase strengthened. Benchmark 10-year US Treasury yields also rose to their highest level since 2007.
Read more: US market ends down as oil prices, Treasury yields rise
Higher US yields and expectations of tighter monetary policy have supported the dollar while putting pressure on the yuan and other Asian currencies.
Trump welcomed Xi to Washington on Wednesday for a three-day visit. US Treasury Secretary Scott Bessent said Washington and Beijing had agreed to extend their trade truce through January 10, although the two-month extension was shorter than markets had anticipated.
With significant differences remaining over trade and technology, market participants have kept expectations for the talks relatively limited, with attention focused on whether the meeting produces concrete progress.
The offshore yuan was also down around 0.09% at 6.7182 per dollar in Asian trading. The dollar index, which measures the greenback against six major currencies, stood at 101.15.
The yuan’s recent rise to a 3-1/2-year high had already reflected some market expectations of improving US-China relations, Kaiyuan Securities said in a note cited by Reuters. The focus now is on whether the talks generate fresh developments on tariffs, technology and other areas.
Separately, China’s central bank said on Wednesday it would inject as much as 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 trading ranges, noting that upcoming Chinese holidays could reduce market liquidity.
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