The yuan surge comes after US President Donald Trump said on Sunday the United States was meeting with many countries, including China, to discuss trade deals, and his main priority with Beijing was to secure a fair trade deal.
Beijing had earlier on Friday said it was “evaluating” an offer from Washington to hold talks over Trump’s tariffs, although it warned the United States not to engage in “extortion and coercion”.
“Hopes of a US-China dialogue and signs of progress on possible trade deals have reinforced the de-escalation thematic,” said Christopher Wong, FX strategist at OCBC Bank.
Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2 per cent band, at 7.2008 per dollar, its strongest since Apr 7 but only 6 pips firmer than the previous setting.
“Today’s fixing showed that the PBOC is reluctant to see strong appreciation of the yuan,” said Becky Liu, head of China macro strategy at Standard Chartered.
Liu said the yuan’s regional underperformance is expected to continue, noting possible frontloading of foreign exchange demand by overseas listed Chinese companies for their dividend payments and uncertainty around Sino-US trade relations.
Khoon Goh, head of Asia research at ANZ, echoed the view and said “with the PBOC making it clear that the fix is going to be anchored above 7.20 and dampening expectations of yuan strength, this should stem the recent appreciation seen in other Asian currencies.”
