China’s yuan hit the strongest level against the dollar in nearly three years on Tuesday as onshore traders returning from a nine-day holiday bet the US Supreme Court ruling against President Donald Trump’s tariffs will bolster Chinese exports.
Sentiment was also aided by renewed dollar weakness, as well as signs of elevated forex inflows following China’s record current account surplus in the fourth quarter.
The yuan firmed roughly 0.1 percent to 6.8975 per dollar in early trading, having hit the strongest level since May 2023.
The dollar index was steady in Asian trade on Tuesday after two sessions of declines.
The US Supreme Court on Friday struck down Trump’s emergency tariffs, leading him to pledge a new 15 percent levy on US imports from all countries.
Analysts say the new tax regime could translate into lower taxes for Chinese exports, potentially bolstering the yuan.
Guosheng Securities expects a 8.4 percentage-point tariff reduction, potentially resulting in a 9.1 percent rebound in Chinese exports to the US. Goldman Sachs predicts a net reduction of around 5 percent in US tariffs on Chinese goods.
Analysts at Morgan Stanley and J.P. Morgan expect tariff rates on China to decline to 24 percent and 27 percent, respectively, from 32 percent earlier.
The ruling “essentially restricts Trump’s tariff abuse,” Industrial Securities said in a report.
Although China still faces threats from US tariffs under the Section 301 framework, the risk is manageable in the near term thanks to easing Sino-US tensions, the brokerage said.
Trump will travel to China from March 31 to April 2 for a highly anticipated meeting with Chinese President Xi Jinping.
The yuan is also getting a tailwind from robust forex inflows as exporters’ rush to convert dollar receipts into the local currency extended into the new year.
Monthly net forex inflows via Chinese banks totaled US$79.9 billion (HK$624.7 billion) in January, the third largest in history, according to official forex settlement data. It followed record inflows in December.
Meanwhile, preliminary data shows China’s current account surplus hit a record high in the fourth quarter, thanks to strong exports as shippers diversified into non-US markets.
“Looking forward, we expect a larger current account surplus in 2026 on wider goods trade surplus,” Goldman said, expecting the yuan to appreciate gradually this year.
Reuters
