SHANGHAI: China’s yuan slipped against the dollar on Friday, as investors headed into the weekend fretting about US President Donald Trump’s capricious tariff policy that has dramatically raised the level of uncertainty in financial markets.
Global currency markets had a wild week reacting to fast-changing developments in trade tensions between Washington and Beijing and Trump’s threats to fire Federal Reserve Chair Jerome Powell.
In his latest remarks, Trump asserted that trade talks between the US and China were underway, pushing back against Chinese claims that no discussions have taken place.
“Trump is so unpredictable, and it’s hard to guess what will happen next,” said a trader at a foreign bank.
By 0312 GMT, the onshore yuan was 0.09% lower at 7.2963 per dollar, and almost flat for the week so far, while its offshore counterpart traded down about 0.11% in Asian trade to 7.2966.
Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate, around which the yuan is allowed to trade in a 2% band, at 7.2066 per dollar, and 832 pips firmer than a Reuters’ estimate of 7.2898.
This month, the PBOC slightly eased its control on the currency, allowing official guidance to weaken past the key threshold of 7.2. However the guidance came in stronger than market forecasts, which traders interpreted as an official attempt to keep the yuan steady while allowing some flexibility to counteract tariff shocks.
Underlining the external risks, however, the yuan’s value against the its major trading partners, as measured by the CFETS yuan basket index, hovered near a 21-month low of 96.29, according to Reuters calculations based on official data.
The CFETS index has lost about 5.1% year-to-date, while the yuan was largely flat against the dollar during the same period.
“While market attention may have shifted slightly to the yuan’s recent weakness against the CFETS basket, we believe this is much less of a concern for Beijing,” said Ting Lu, chief China economist at Nomura.
