FX.co ★ Offshore Yuan Dips as US-China Tensions Rise

The offshore yuan weakened to approximately 7.31 per dollar on Tuesday amid escalating US-China trade tensions. Beijing issued a warning on Monday, indicating it would retaliate against nations that align with US policies perceived to undermine Chinese interests, thereby heightening global trade uncertainties. This development comes on the heels of reports suggesting the Trump administration's intent to leverage tariff negotiations to persuade allies to curb their associations with China. Despite these geopolitical challenges, investors remain optimistic about potential stimulus measures from Beijing, such as increasing bond issuance and ramping up government expenditure, to counterbalance the economic repercussions of US tariffs. Also, the yuan received a measure of support as the People’s Bank of China promoted its global usage by encouraging state enterprises to conduct trade settlements in yuan and expand cross-border credit activities. In terms of monetary policy, the PBoC has maintained stable lending rates following economic data earlier this month that surpassed expectations, indicating a limited scope for further easing.