China’s yuan weakened against the U.S. dollar on Wednesday after the central bank set a weaker guidance rate for the first time in 11 sessions, as rising trade tensions with Europe added to concerns over the outlook for Chinese exports.
The onshore yuan was trading at 6.7050 per dollar around midday, down 0.07% from the previous close. Before the market opened, the People’s Bank of China (PBOC) set the yuan’s midpoint at 6.7468 per dollar, ending a 10-session run of stronger daily guidance, according to Reuters.
The midpoint was 497 pips weaker than the Reuters estimate, continuing a pattern seen in recent months that signals policymakers’ preference for a more measured pace of yuan appreciation.
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The currency had strengthened steadily ahead of a planned meeting between U.S. President Donald Trump and Chinese President Xi Jinping in Washington. The PBOC, however, has shown signs of becoming more cautious about allowing the yuan to rise too rapidly, according to Reuters.
The shift comes as China’s export momentum faces growing headwinds. Trade tensions with Europe have intensified, with European officials and companies raising concerns over the competitive pressure from Chinese manufacturers.
The European Central Bank said on Tuesday that China’s industrial transformation was putting pressure on European companies and reducing their share of global markets, with German firms among those facing significant challenges. European auto executives and politicians have also called for stronger trade measures, including local-content requirements and wider tariffs covering Chinese plug-in hybrid vehicles.
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Fitch Ratings said Europe was facing increasing growth challenges from China’s global competitiveness. The ratings agency lowered its forecast for China’s 2026 economic growth by 0.1 percentage point to 4.5%, citing rising economic imbalances.
Fitch expects the yuan to appreciate only moderately in 2027 and 2028, despite China’s strong external position, as the central bank continues to lean against excessive currency appreciation to limit large swings in the dollar exchange rate.
The yuan’s move also came as the dollar strengthened for a third consecutive session, with the dollar index hovering near an eight-week high.
The upcoming meeting between Trump and Xi could provide further direction for markets and the yuan. Oxford Economics said the meeting indicated that U.S.-China relations were becoming more predictable, although issues such as Taiwan could remain contentious.
A key focus will be whether the two leaders signal an extension of the trade truce reached last year, which helped avert a major shock to the global economy.
China’s export outlook remains a key consideration for currency policy. Reuters reported that analysts expect the country to enter 2027 with a combination of nominal yuan appreciation and slower headline export growth as trade pressures increase and the PBOC seeks to manage the pace of currency gains.
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