HONG KONG: China’s yuan rose on Monday to its highest against the dollar since Jan. 3 buoyed by a friendly call between US President-elect Donald Trump and Chinese President Xi Jinping on Friday and better-than-expected fourth-quarter economic data.
The two spoke by phone just days ahead of Trump’s return to the White House with his threat of new US tariffs that could ratchet up tensions between the world’s two biggest economies. Both leaders were upbeat about the call.
By 0340 GMT, the yuan was 0.12% higher at 7.3160 to the dollar after trading in a range of 7.3088 to 7.3246.
Traders and analysts believe that signs of a possible improvement in US-China ties brought some relief to Chinese assets.
“The surprising Trump-Xi call before Trump’s inauguration eased concerns about the immediate implementation of radical US tariffs,” Ken Cheung, chief Asian FX strategist at Mizuho Bank said in a note.
Encouraging China economic data also fueled a positive mood in Chinese markets, he said.
China reported its economy grew 5.4% in the fourth quarter, beating market forecasts. That brought full-year growth to 5% last year, matching the government’s target, largely driven by industrial output and exports.
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 7.1886 per dollar, 1,467 pips firmer than a Reuters’ estimate.
China’s yuan stutters near 16-month low, a whisker away from downside limit
Although the yuan is facing depreciation pressure, markets in general believe Beijing will not use the exchange rate as a policy tool to offset expected US tariffs in a second Donald Trump presidency.
Trump has threatened tariffs of up to 60% on imports of Chinese goods during his second term beginning on Monday.
China’s central bank told Reuters late on Friday it is confident it can keep the yuan exchange rate “basically stable” at a “reasonable and balanced” level.
The offshore yuan traded at 7.3257 yuan per dollar, up about 0.24% in Asian trade, marking the highest level in more than two-weeks.
The dollar’s six-currency index was 0.174% lower at 109.14.
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