China's yuan rises to 3-week high on fresh signs of easing trade tensions, firmer guidance
Investor hopes for the two superpowers to reach a final trade deal rose after U.S. Treasury Secretary Scott Bessent said on Tuesday that U.S. and Chinese officials will meet in Stockholm next week to discuss extending a tariff truce.
The 90-day tariff truce agreed by Washington and Beijing during trade talks in Switzerland is due to end on August 12.
The EU-China summit later this week and the August deadline for Beijing and Washington to 'reach a trade deal will matter with regards to external demand conditions for China, and are likely to set the tone for the China trade in the second half,' Barclays analysts said in a note.
The onshore yuan rose to a high of 7.1602 per dollar, the loftiest level since July 3, before changing hands at 7.1617 as of 0342 GMT.
Its offshore counterpart followed suit to rise past 7.16 per dollar level for the first time in nearly three weeks. It last traded 0.14% higher at 7.1602.
Currency traders also attributed the yuan strength to a much firmer guidance fix as the central bank lifted the midpoint to a fresh eight-month high.
Prior to the market opening, the People's Bank of China (PBOC) set the midpoint rate at 7.1414 per dollar, its strongest since November 6 and 182 pips firmer than a Reuters estimate of 7.1596. The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
Some market participants and analysts argued that the economic fundamentals may not support a significantly stronger currency for the time being.
'Exports could face stronger tariff headwinds in the second half after front-loading in the first half … a stronger yuan could further dampen corporate profitability and further weaken the labour market,' said Becky Liu, head of China macro strategy at Standard Chartered.
She said a rising yuan would worsen China's deflationary pressure even as authorities are making efforts to revive demand and the broader economy.
Liu revised her yuan forecasts to 7.25 per dollar at end-September and 7.35 at year-end, up from the previous predictions of 7.65 and 7.75, respectively - still notably weaker than the current spot level.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
an hour ago
- Business Recorder
European shares rise to 4-month high after US-EU trade deal
European shares advanced to a four-month high on Monday, led by gains in auto and pharmaceutical stocks, after the EU cinched a trade deal with the US, avoiding a wider trade war ahead of the August 1 deadline. The pan-European STOXX 600 index rose 0.8% by 0715 GMT. Most regional bourses were also in the green, with UK's FTSE 100 adding 0.3%, Germany's blue-chip DAX rising 0.7% and France's CAC 40 gaining 1.1%. The trade agreement imposes a 15% tariff on most EU goods and requires the EU to invest around $600 billion in the U.S., with tariff rates on spirits still under negotiation. Automobile stocks were boosted on the day with Porsche and Volkswagen gaining 1.6% and 1.9%, respectively. Mercedes-Benz, Stellantis and Volvo Cars, which have pulled their 2025 financial guidance due to U.S. trade uncertainty, rose between 1.6% and 3%. Pharmaceutical stocks also gained with the base tariff rate extending to cover healthcare. Novo Nordisk and Roche both rose more than 1.5%. Expectations of similar trade agreements with other US trading partners before the August 1 tariff deadline have helped lift the benchmark STOXX 600 to within 1.8% of its all-time high hit on March 4, marking a 19.5% rebound from its April trough. LVMH rose 0.7% after media reports said French luxury goods group is in discussions with multiple buyers to offload its fashion label Marc Jacobs.
Business Recorder
2 hours ago
- Business Recorder
Trump, Starmer to meet in Scotland, with trade and Gaza on agenda
EDINBURGH: US President Donald Trump will host British Prime Minister Keir Starmer at his golf resort in western Scotland on Monday for talks expected to range from their recent bilateral trade deal to the worsening hunger crisis in Gaza, the two governments said. Trump, riding high after announcing a huge trade agreement with the European Union late on Sunday, said he expected Starmer would also be pleased. 'The prime minister of the UK, while he's not involved in this, will be very happy because you know, there's a certain unity that's been brought there, too,' Trump said. 'He's going to be very happy to see what we did.' Starmer had hoped to negotiate a drop in U.S. steel and aluminum tariffs as part of the discussions, but Trump on Sunday ruled out any changes in the 50% duties for the EU and has said the trade deal with Britain has been 'concluded.' The two men are expected to travel from Trump's luxury golf resort in Turnberry, on Scotland's west coast, to a second sprawling estate owned by Trump in the east, near Aberdeen. Starmer was heading to Scotland from Switzerland, where England on Sunday won the Women's European Championship final. Casting a shadow over their visit has been the deepening crisis in the war-torn Gaza enclave, where images of starving Palestinians have alarmed the world. Starmer has recalled his ministers from their summer recess for a cabinet meeting, a government source said on Sunday, most likely to discuss the situation in Gaza as pressure grows at home and abroad to recognize a Palestinian state. The British leader on Friday said his country would recognize a Palestinian state only as part of a negotiated peace deal, disappointing many in his Labour Party who want him to follow France in taking swifter action. Trump on Friday dismissed French President Emmanuel Macron's plan to recognize a Palestinian state, an intention that also drew strong condemnation from Israel, after similar moves from Spain, Norway and Ireland last year. Trump said he understood Starmer wanted to discuss Israel, adding that while the U.S. would increase its aid to Gaza, it wanted others to join the effort. Ukraine will also be on the agenda. Dozens of Gazans have died of malnutrition in recent weeks, according to the Gaza Health Ministry in the Hamas-run enclave, with aid groups warning of mass hunger among Gaza's 2.2 million people. The war began on October 7, 2023, when Hamas-led fighters stormed southern Israel, killing 1,200 people, mostly civilians, and taking 251 hostages back to Gaza, according to Israeli tallies. Since then, Israel's offensive has killed nearly 60,000 people in Gaza, mostly civilians, according to Gaza health officials. It has reduced much of the enclave to ruins and displaced nearly the entire population.
Business Recorder
2 hours ago
- Business Recorder
China stocks cool after 5-week rally as investors eye US trade talk progress
HONG KONG: China stocks pulled back from a five-week rally on Monday, as investors looked beyond Beijing's efforts to curb competition and overcapacity, instead focussing on U.S. trade talk progress, while Hong Kong stocks rose, driven by insurers' rally. At the midday break, the Shanghai Composite index fell 0.2% to 3,587.69 points after climbing for five straight weeks to a 3-1/2-year high. China's blue-chip CSI300 index shed 0.2%. Commodity-related companies pared last week's rally spurred by Beijing's 'anti-involution' campaign, with indexes tracking steel and coal sectors losing 1.7% and 2.9%, respectively, to weigh on the markets. Beijing launched an 'anti-involution' campaign this month to tackle 'disorderly price competition,' or overcapacity, amid persistent deflationary pressure at home and trade curbs abroad. Insurers added 2.4% to rank among the best performers after the industry body cut the reference rate for life insurance products. Top U.S. and Chinese economic officials will resume talks in Stockholm later in the day, likely extending their trade truce by three months and preventing the implementation of higher tariffs. CITIC Securities says the recent onshore bullish run is mostly liquidity-driven, and whether it can become a longer-lasting bull market will depend on actual improvements in economic fundamentals. Hong Kong's benchmark Hang Seng Index rose 0.4% to 25,490.45 and continued to hover near the highest since November 2021. Insurers AIA, Ping An and China Life gained between 3.2% and 4.5%. However, the tech index lost 0.6%.
