Yuan steady as firm midpoint counters dollar strength
The dollar rose against major currencies, hovering near the highest level since June 20, after U.S. inflation suggested tariffs are pushing prices up, dampening expectations for Fed policy easing and driving Treasury yields higher.
Prior to the market opening, the People's Bank of China set the midpoint rate at 7.1526 per dollar, 388 pips firmer than a Reuters' estimate, the largest deviation since May 9. The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
The spot yuan opened at 7.1800 per dollar and was last trading at 7.1815 as of 0226 GMT, 5 pips lower than the previous late session close and 0.4% weaker than the midpoint.
'Headline risk remains two-way with U.S.-China trade talks set to intensify in the coming month,' Citi analysts said in a note.
U.S. tariff developments have been a key driver of dollar-yuan moves in recent months.
China's yuan holds steady amid stimulus hopes after Q2 GDP data
The Trump administration's emphasis on national security and strategic priorities is likely to keep U.S.-China relations strained, Citi analysts said, adding that their Washington-based policy experts expect a decision soon on the Section 232 investigation into critical minerals, an area where China dominates global rare earths production.
Nvidia's planned resumption of sales of its H20 AI chips to China is part of U.S. negotiations on rare earths, Commerce Secretary Howard Lutnick said on Tuesday, and comes days after its CEO met President Donald Trump.
UBS analysts raised their 2025 GDP growth forecast for China to 4.7% and said the yuan may strengthen in the near term.
However, they warned that a slowing economy and lingering tariff-related uncertainties could push the dollar-yuan exchange rate to 7.1–7.2 by year-end.
China's economy slowed less than expected in the second quarter in a show of resilience against U.S. tariffs.
The dollar's six-currency index was 0.015% higher at 98.6.
The offshore yuan traded at 7.184 yuan per dollar, down about 0.01% in Asian trade.
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