SHANGHAI: China’s yuan hits its strongest level in three and a half years as escalating trade and geopolitical tensions add to pressure for the currency to appreciate.
The Chinese currency was also bolstered yesterday by a softer dollar index, as easing Middle East tensions weakened the greenback’s appeal.
With the yuan under growing international scrutiny, “global policymakers appear increasingly aligned in discouraging competitive currency weakness”, DBS said in a note. Yesterday, the onshore yuan changed hands at 6.7470 per dollar around noon time, having touched the strongest level since February 2023.
The US dollar index slipped about 0.1%. China is facing growing geopolitical risks as well as pressure over trade imbalances.
The Trump administration is preparing to set a price floor and impose tariffs on polysilicon and related products, seeking to protect US polysilicon factories from growing Chinese ambitions in the chip supply chain, sources told Reuters. Washington is also drafting a ban on US imports of new models of Chinese data centre components on national security grounds.
Meanwhile, the United States has joined hands with Japan to stabilise a falling yen, while the European Union is pressing China over alleged yuan undervaluation.
“These developments reinforce the case for investors to pay closer attention to Asian currency appreciation than depreciation risks,” DBS said. — Reuters
