HONG KONG: China’s yuan dipped slightly on Tuesday as the dollar was underpinned by rising odds of former President Donald Trump winning next month’s US election and on expectations the Federal Reserve will resist aggressive monetary easing.

The dollar clung to a 2-1/2-month high in early Asia trade on surging treasury yields.

By 0358 GMT, the yuan was 0.03% lower at 7.1232 to the dollar after trading in a range of 7.1199 to 7.1260.

The spot yuan opened at 7.1240 per dollar and was last trading 22 pips lower than the previous late session close and 0.01% weaker than the midpoint.

The yuan has come under pressure as rising expectations that Trump will return to the White House in November have brought back the prospects of higher tariffs on Chinese exports.

Moreover, a Trump presidency could mean higher US inflation benefiting the dollar, analysts say.

“Markets are watching if Trump trade is heating up and pushing the yuan back to 7.15 against the dollar,” Carie Li, global market strategist at DBS Bank (Hong Kong), said in a note.

China’s yuan firmer against dollar

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 7.1223 per dollar, 6 pips firmer than a Reuters’ estimate.

After a rally in September along with the sharp equity market rebound, the yuan is down 1.5% against the dollar this month, and 0.3% weaker this year.

The offshore yuan traded at 7.1345 yuan per dollar, up about 0.04% in Asian trade.