China's yuan hovered near a three-year high against the US dollar on Tuesday, ahead of a highly anticipated meeting between President Donald Trump and Chinese President Xi Jinping this week.
The two leaders are set to meet in Beijing on May 14-15, with trade, technology, Taiwan and artificial intelligence expected to top the agenda. It will mark the first visit to China by a US president in nearly a decade.
Market participants said yuan sentiment is likely to remain upbeat as the meeting takes place, after the onshore spot rate strengthened past the key 6.80 level and hit a three-year high in the previous session. The yuan is up 0.5 percent against the dollar this month, and 3.0 percent firmer this year.
The spot yuan opened at 6.7972 per dollar and was trading at 6.7932 as of 0248 GMT, 31 pips stronger than the previous late session close.
"Low expectations leaves room for an upside surprise should the two sides signal a willingness to establish a more durable framework for dialogue," said UBS strategists in a note, adding that they remain constructive on the offshore yuan.
The offshore yuan traded at 6.7918 yuan per dollar, up about 0.01 percent in Asian trade.
"While we agree that the summit could be a tactical catalyst for CNY strength, and an important marker in stabilising trade relations, we think the case for a stronger CNY is more fundamental and longer-lasting beyond this week's events," Goldman Sachs analysts said in a note.
China's external surplus is approaching unprecedented levels as a share of global GDP, reflecting deep levels of export competitiveness and a highly undervalued currency, they said.
Prior to the market opening, the People's Bank of China set the midpoint rate at 6.8426 per dollar, its strongest since March 2023 and 481 pips weaker than a Reuters' estimate. The spot yuan is allowed to trade 2 percent either side of the fixed midpoint each day.
China's central bank will continue to implement an appropriately loose monetary policy, and strengthen financial support for expanding domestic demand and scientific and technological innovation, it said in a report released on Monday.
The dollar index, which measures the greenback's strength against a basket of six currencies, steadied near 98 in early Asia trade.
Reuters
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