TLDR:
- China’s yuan touched a 3-year high after the PBOC set its strongest midpoint rate since March 2023.
- The Shanghai Composite fell 1.52%, its worst session in two months, driven largely by profit-taking.
- Analysts say markets are growing less sensitive to Sino-U.S. trade news, shifting focus to technology.
- Xi and Trump agreed to pursue a constructive and strategically stable relationship over the next three years.
China’s yuan climbed to a three-year high against the dollar on Thursday, as per the Reuters report. Meanwhile, key stock indexes pulled back from recent peaks.
Investors shifted to profit-taking mode as they waited for more details from the summit between President Xi Jinping and President Donald Trump.
The meeting in Beijing drew measured optimism across global markets, with most participants keeping expectations low.
Yuan Strengthens as PBOC Adjusts Guidance Rate
The People’s Bank of China set its midpoint rate at 6.8401 per dollar on Thursday. That marked its strongest level since March 24, 2023. The official fixing came 513 pips weaker than Reuters’ estimate of 6.7888, the largest gap since March 2.
The onshore yuan traded at 6.7877 per dollar as of 0800 GMT. Its offshore counterpart sat at 6.7871. Both figures reflected continued upward pressure on the currency throughout the trading session.
China’s robust exports and a massive trade surplus have steadily pushed the yuan higher this year. The currency has gained roughly 3% against the dollar and is up 2.15% against major trading partners year-to-date.
The central bank has consistently set weaker-than-expected midpoints since November. Market participants believe this approach limits excessive yuan gains and preserves overall currency stability.
Stock Markets Retreat Amid Profit-Taking After Recent Highs
The benchmark Shanghai Composite Index dropped 1.52% on Thursday, its worst single-day performance in nearly two months. That came just one day after the index touched an 11-year high. The blue-chip CSI300 Index also closed down 1.68%.
On the summit outcome, Xi told Chinese state broadcaster CCTV that both leaders had reached an important agreement.
“Building a constructive, strategically stable relationship will provide guidance for bilateral relations in the next three years and beyond,” Xi said, signaling a measured tone from Beijing.
Larry Hu, chief China economist at Macquarie, offered context on Beijing’s broader strategy heading into the talks. “Beijing is adopting a wait-and-see mode, given the better-than-expected first-quarter growth,” Hu said.
“Beijing’s focus for the summit is not on deliverables but on optics, aiming to project stability and predictability to both international and domestic audiences.”
Richard Pan, fund manager at China Asset Management Co., weighed in on shifting market sentiment. “The development of the trade war shows that China and the U.S. cannot afford to enter a real big conflict,” Pan said.
He added that markets are becoming less and less sensitive to news around Sino-U.S. trade talks, with investors now focusing more on rapid technology advancement instead.
