China's yuan slips as Middle East tensions rise
SHANGHAI: China's yuan eased against the US dollar on Friday, retreating from a more than two-week high reached overnight, as the greenback rebounded after Israel launched strikes on Iran.
Escalating tensions in the Middle East dented global risk appetite, prompting investors to flock to safe-haven assets such as gold and the US dollar.
The spot yuan opened at 7.1799 per dollar and was last trading at 7.1767 as of 0253 GMT, 52 pips lower than the previous late session close.
Still, traders and analysts said broad weakness in the dollar continues to lend support to the yuan.
Yuan slips as investors wait on outcome of US-China trade talks
Prior to the market opening, the People's Bank of China set the midpoint rate at 7.1772 per dollar, its strongest since March 28 and 87 pips weaker than a Reuters' estimate.
The spot yuan is allowed to trade 2% on either side of the fixed midpoint each day.
The official midpoint has been set in line with market estimates possibly due to the fact that the US dollar has been trading sideways and there is less need for policy guidance at this point, Maybank analysts said in a note.
The onshore yuan firmed in the late night session on Thursday, hitting its strongest since May 26, as the dollar index fell to its lowest in over three years on weaker-than-expected US inflation data.
'On a trade-weighted basis, the yuan has been underperforming, allowing Chinese exports to maintain relative price competitiveness,' they said, adding that the current level marks a sweet spot for trade negotiations with the US China's trade-weighted CFETS yuan basket index fell to 95.49, the lowest since July 2023, according to Reuters estimates.
The offshore yuan has firmed towards 7.17 amid broader US dollar weakness and an improved outlook after the US and China reached agreement on a trade framework, said Chang Wei Liang, currency and credit strategist at DBS.
A private property developer launched a US dollar bond sale for the first time since 2023, a sign that stress in China's real estate financing sector may be easing, he said.
An index that measures the dollar against six other currencies rose 0.45% and was last at 98.12.
The offshore yuan traded at 7.1794 yuan per dollar, down about 0.09% in Asian trade.
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