Yuan firms as China sets strongest fix in a year

SHANGHAI: The yuan strengthened against the US dollar on Tuesday after China's central bank set the daily midpoint at its firmest level in a year, while investors awaited details from a key political meeting in Beijing.

Meanwhile, US President Donald Trump said on Monday he expects to reach a fair trade deal with Chinese President Xi Jinping and downplayed risks of a clash over the issue of Taiwan, even as his top trade negotiator accused Beijing of engaging in "economic coercion."

Risk appetite improved and Asian currencies broadly firmed as markets appeared to take the latest developments in US-China trade talks in stride, analysts at MUFG said in a note.

"While we think that a meeting between Trump and Xi later this month is still the most likely scenario and some tentative agreement, the vast gulf in expectations on both sides tells us that markets are too sanguine at the moment in their assessment of the possible outcomes," they said.

Prior to the market opening, the People's Bank of China set the midpoint rate at 7.0930 per dollar, its strongest since Oct 15, 2024 and 289 pips firmer than a Reuters' estimate. The spot yuan is allowed to trade 2 per cent either side of the fixed midpoint each day.

The guidance has largely remained stronger than market projections for months, with traders interpreting it as an official sign that the central bank wants to keep the yuan stable.

The spot yuan opened at 7.1200 per dollar and was last trading at 7.1174 as of 0213 GMT, 56 pips firmer than the previous late session close and 0.34 per cent weaker than the midpoint.

The elite Central Committee of China's ruling Communist Party holding its Fourth Plenum from Monday to Thursday. It will outline the government's economic, political and social agenda as well as its development plans for the next five years.

"As the Fourth Plenum is underway，we expect USD/CNY to stay in a tight range as the PBOC ensures volatility is kept at a minimum during these big political events," said Alex Loo, currency and macro strategist at TD Securities.

The offshore yuan traded at 7.1187 yuan per dollar, up about 0.09 per cent in Asian trade. The dollar index, which tracks the greenback against six major peers, was last up 0.028 per cent at 98.64.

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