China's yuan firmed on Friday, as newly-released data showed the country's trade surplus with the United States soared in the first quarter despite an unexpected fall in March exports. As President Xi Jinping pledged to further open China's markets, investors are growing optimistic that a full-blown trade war between Beijing and Washington could be avoided, while a sharp depreciation in the yuan, or renminbi, is unlikely.
"In our view, Chinese authorities are unlikely to use renminbi devaluation as a retaliatory measure and are instead likely reminding the US that they have this tool available," wrote J.P. Morgan Asset Management Global Market Strategist Hannah Anderson. The People's Bank of China set the midpoint rate at 6.2898 per dollar prior to market open, weaker than the previous fix 6.2834.
The spot market opened at 6.2899 per dollar and was changing hands at 6.2912 at 0525 GMT. The offshore yuan (CNH) was trading at 6.2889 per dollar, weaker than the previous day's unofficial close of 6.277.
China's exports growth unexpectedly fell in March, data showed on Friday, the first drop since February last year, but March import growth beat expectations. That left China with a rare trade deficit for the month, also the first drop since last February. Still, China's quarterly trade surplus with the United States surged 19.4 percent to $58.25 billion.
The Thomson Reuters/HKEX Global CNH index, which tracks the offshore yuan against a basket of currencies on a daily basis, stood at 97.86, weaker than the previous day's 97.89. The global dollar index rose to 89.777 from the previous close of 89.751. The offshore yuan was trading 0.06 percent away from the onshore spot at 6.288 per dollar.
Offshore one-year non-deliverable forwards contracts (NDFs), considered the best available proxy for forward-looking market expectations of the yuan's value, traded at 6.383, -1.46 percent away from the midpoint.