SHANGHAI: China's yuan ended Tuesday's domestic trading session at a 5-1/2-month high against the dollar, as investors welcomed talks between U.S. President Joe Biden and Chinese leader Xi Jinping.
Both the onshore and offshore yuan jumped, with the onshore spot price hitting a high of 6.3666 per dollar before ending domestic trading session at 6.3770, the strongest such close since June 1, up 0.11% from previous late night close.
Its offshore counterpart also leapt to 6.3616 at one point, the highest since June 1.
Currency traders said the meeting between Biden and Xi offered signs of improvements in bilateral relations and chances of partial tariff removals.
"The virtual summit was only meant to ease tension. It was not intended to achieve normalisation of the bilateral relationship," said Raymond Yeung, China economist at ANZ.
"The summit paves the way for subsequent trade negotiations, during which the U.S. may soften its trade measures against China." Trade disputes between the world's two largest economies have been one of the key factors influencing the yuan and broad financial market sentiment over the last few years.
"I think the (U.S.) president and his secretary of state are beginning to find channels through which agreement can be reached," said Carl Tannenbaum, chief economist at Northern Trust.
"And in fact it was just last week that some contemplation of reducing tariffs against China was floated by Washington, and that was eagerly received in Beijing. So I want to be careful and not be overoptimistic." The Biden administration was getting traction with China in talks over Beijing's compliance with a Trump-era trade deal, U.S. Trade Representative Katherine Tai said last week, but she declined to predict an outcome while discussions continue.
"The possibility of substantial improvement in Sino-U.S. relations within this year is not high," Marco Sun, chief financial markets analyst at MUFG Bank, said, expecting the yuan to consolidate on the firmer side of 6.4 per dollar in the near term. - Reuters