SHANGHAI: China’s yuan hovered near a two-week low on Tuesday against a steady dollar, with investors awaiting an inflation report that will determine when the Federal Reserve will cut interest rates.

News of fresh US tariffs this week and China’s weak credit growth data for April also weighed on the Chinese currency, sapping investor confidence.

The yuan is down 2% this year, pressured by its relatively low yields versus other currencies and a struggling property market, which is weighing heavily on the economy.

Prior to the market open, the People’s Bank of China set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.1053 per US dollar, weaker than the previous fix 7.103.

In the spot market, the onshore yuan opened at 7.2331 per dollar and was changing hands at 7.2376 at midday, 44 pips weaker than the previous late session close.

The market will focus on the consumer price index on Wednesday which is expected to show core CPI rose 0.3% month-on-month in April, less than 0.4% growth the prior month, according to a Reuters poll. Before that, the US Producer Price Index is due to be released later on Tuesday.

Maybank analysts said any downside surprise in the CPI data could nudge the offshore yuan stronger than the 7.2280 level.

US President Joe Biden is set to announce new China tariffs as soon as this week targeting strategic sectors, including a major hike in levies on electric vehicles (EVs), sources said.

China’s yuan drops to 2-week low

New tariffs imposed by the United States may dent market confidence, while US inflation may exceed expectations, keeping the yuan under pressure in the short term, market participants said.

Separately, new bank lending in China fell more than expected in April from the previous month, while broad credit growth hit a record low, raising the prospect of more action to support the economy.

The global dollar index rose to 105.277 from the previous close of 105.218.

The offshore yuan was trading at 7.2427 per dollar.