FX.co ★ Offshore Yuan Firms Despite Headwinds

On Tuesday, the offshore yuan rebounded to approximately 7.2 against the dollar, recovering losses from the previous day. This improvement occurred despite disappointing Purchasing Managers' Index (PMI) data and ongoing global trade frictions. A private survey indicated that China's manufacturing sector surprisingly contracted in May for the first time in eight months, with the fastest decline since September 2022. This is consistent with the official Chinese PMI released on Saturday, which also reported a second consecutive month of decrease in factory activity. Such data highlights the increasing impact of U.S. tariffs and strengthens the call for more robust economic stimulus. Meanwhile, tensions heightened as China rejected U.S. allegations of breaching a temporary trade agreement, instead attributing the breach to Washington, signaling deteriorating relations. Despite these challenges, markets found some relief in the anticipation of a potential trade discussion between Presidents Trump and Xi this week, fostering cautious optimism.