The Chinese yuan hit a three-year high against the US dollar before pulling back slightly. The United States stated that it continues to engage with Tehran regarding a potential agreement to end the conflict, even as it began blockading Iran's ports on Monday. A senior investment officer at UBS Wealth Management noted in a memo: «Direct negotiations suggest that geopolitical risks have likely peaked, and both sides want to avoid the worst-case scenario, which is a prolonged closure of the Strait and further damage to civilian and energy infrastructure». He added that talks between Washington and Tehran will be difficult due to significant disagreements on various issues. In spot trading, the yuan was quoted at 6.8204 per dollar, reaching 6.8194 in the latest session at 02:09 GMT, up 106 points from the previous session's close. The yuan has risen 1.2% against the dollar this month and 2.6% this year, boosted by increased Chinese exports and companies converting their dollar reserves into yuan. They noted that China's exports are expected to remain strong, and measures to boost domestic demand are gaining momentum. On Tuesday, the Chinese yuan reached a three-year high against the dollar, which fell to a one-month low amid expectations that ongoing dialogue between Washington and Tehran could lead to progress in ending the war. In onshore trading, the yuan strengthened to 6.8182 per dollar, its strongest level since March 23, 2023. With the improving appeal of local stocks, the yuan is likely to rise slightly, albeit with fluctuations. Meanwhile, major global investment banks currently expect China to keep interest rates steady this year, reversing their previous calls for cuts. New bank loans in China grew less than expected in March, but overall money supply and credit growth remained sufficient to support economic growth, suggesting the central bank is not in a hurry to ease monetary policy. Analysts at TF Securities expect a continued decline in geopolitical risks and stabilization of the external environment.
