President of the USA Donald Trump stated on Tuesday that he will not hesitate to communicate with Chinese leader Xi Jinping, as tariffs come into effect soon after the midterm elections. The renminbi exchange rate opened at 7.2700 per dollar and at 02:21 GMT was trading at 51 pips lower than the previous close. During the first term of President Trump, the yuan depreciated more than 12% against the dollar during the series of retaliatory tariffs between the USA and China from March 2018 to May 2020.
"Considering the perspective of negotiations between the USA and China, trade tensions may remain under control at the present moment, and the dollar/yuan exchange rate could stabilize around 7.30," said Zhang Wei Lian, a currency and credit strategist at DBS. Before the market opens, the People's Bank of China set an official yuan rate, within which the currency can fluctuate by about 2%, at the level of 7.1691 per dollar. This is the strongest rate since early November 2024 and is 844 pips above the forecast of the Reuters agency.
"If the decline of the dollar continues in the recent time, it is likely that the dollar/yuan exchange rate will maintain the level of 7.20 up 'to two sessions' of China at the beginning of March," said Alvin Tan, head of Asia currency strategy at RBC Capital Markets. The offshore yuan is trading at a level of 7.279 per dollar, rising by about 0.05% in Asian trades.
China is seeking to involve the World Trade Organization to consider the issue of new tariffs imposed by President Trump, which has raised concerns in the market about a possible disruptive trade war between the two economic giants. China filed a complaint with the WTO against recent tariffs of 10% on Chinese imports and demanded exemption from duties for low-income products, claiming that actions "protectionist" and violate WTO rules.
"The question remains open, as in general, how Trump will react," analysts at Citi said in a note. "Markets are likely to react to China’s complaint to the WTO regarding the new American tariffs." "We continue to wait for a discussion between Trump and Xi."
