China’s yuan weakens against US dollar ahead of tariff plans

HONG KONG: China’s yuan weakened against the U.S. dollar on Tuesday as markets await more details on President Donald Trump’s reciprocal tariff announcements this week.

Sentiment was fragile ahead of the new round of tariffs set to be announced on Wednesday, which Trump has dubbed ‘Liberation Day,’ where he is expected to unveil tariffs targeting all nations.

The yuan was 0.1% lower at 7.2639 to the dollar by 0255 GMT, giving up some ground gained on Monday and continuing to hover near a three-week low.

The offshore yuan traded at 7.2736 yuan per dollar, down about 0.09%.

“We expect the announced tariffs on April 2 to be broad and extensive and to herald a firmer USD,” analysts at Barclays said in a note to clients.

“We think Asia will bear the brunt, with CNY resilience set to fade amid weak growth momentum.”

The yuan has strengthened 0.5% against the dollar this year, as the greenback’s rally petered out on trade war concerns and fears of a recession in the U.S.

Yuan hovers near 3-week low

The dollar’s six-currency index was flat at 104.09 on Tuesday after losing over 4% in the first quarter.

Prior to the market opening, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1775 per dollar, 831 pips firmer than a Reuters’ estimate.

The central bank has set its official guidance on the firmer side of market projections since mid-November, which analysts and traders see as a sign of unease over the yuan’s decline.

Chinese government 10-year bond yields fell 1.8 basis points to 1.87%. The yield on similar U.S. government benchmark debt was 4.2%.