By Summer Zhen
HONG KONG (Reuters) – The yuan came under renewed pressure against the dollar on Thursday, giving up some initial gains, as markets reflected on a Reuters report that China could weaken the yuan to counter the risk of U.S. to withstand trade tariffs.
At 0400 GMT, the yuan was 0.03% lower at 7.2637 against the dollar, after trading in a range of 7.2565 to 7.2677.
Reuters reported on Wednesday, citing sources, that China’s top leaders and policymakers are considering allowing the yuan to weaken in 2025 as they brace for higher US rates when Donald Trump returns to the White House.
The yuan and currencies across Asia fell against the dollar after Wednesday’s news.
Pressure on the currency intensified as Chinese long-term interest rates fell to record lows on the back of monetary easing expectations, pushing the yield disadvantage against the US to the widest in 22 years.
Before the market opened, the People’s Bank of China set the midpoint rate, around which the yuan can trade in a 2% range, at 7.1854 per dollar, little changed from the previous session and 584 pips firmer than a Reuters estimate.
Currency traders are also awaiting the outcome of a key economic policy meeting to get a clearer picture of plans for monetary and fiscal easing next year.
In an article following the Reuters report, Financial News, the PBOC’s publication, said the basis for an “essentially stable” yuan exchange rate remains “solid,” and that the currency is likely to close by the end of this year stabilize and strengthen. That helped the yuan recover some of its losses.
HSBC analysts say markets should wait for a statement from the Central Economic Work Conference, an annual meeting of Communist Party leaders, to confirm whether there has been a shift in Beijing’s stance on the yuan.
Rong Ren Goh, portfolio manager at Eastspring Investments’ fixed income team, said: “It is not surprising that Chinese authorities are considering the option of allowing currency weakening” as a tool to offset the impact of rates.
However, he expects a controlled, gradual adjustment of the yuan rather than a sharp, uncontrolled depreciation that could destabilize financial markets.
The Chinese currency has fallen in value for ten weeks in a row, influenced by US President Trump’s import tariffs and the differences in monetary policy between China and the United States.
It traded at 7.2661 yuan per dollar, up about 0.19% in Asian trading.
