The USD/CNH exchange rate is showing signs of depreciation as reports from state-supported Chinese media emphasize a stable and balanced outlook for the Yuan. During the Asian trading hours on Thursday, the rate retraced some of its previous gains, settling around 7.2660. The People’s Bank of China (PBOC) adjusted its central rate for the Yuan against the US Dollar to 7.1854, slightly up from 7.1843 from the previous day.
Experts highlighted in recent media reports suggest that there are increasing signals of a possible weakening of the US Dollar. This expectation aligns with projections of an imminent rate cut by the Federal Reserve in December. As a result, analysts anticipate continued fluctuations in the Yuan due to prevailing market dynamics.
In conjunction with these developments, Chinese long-term yields have seen a decline, marking a significant widening of the yield gap between Chinese and US Treasury bonds. China’s 10-year yield has fallen to 1.805%, creating a spread of nearly 250 basis points — the most substantial difference witnessed in over two decades, specifically since June 2002.
The offshore Yuan (CNH) is facing obstacles as leaders and policymakers in China are reportedly deliberating the option of allowing the currency to depreciate in response to potential increases in US tariffs. This move could include a broad 10% import levy and substantial 60% duties on Chinese goods entering the United States.
Despite these challenges, the Chinese leadership remains optimistic about the nation’s economic trajectory. President Xi Jinping recently expressed strong confidence in achieving the country’s economic targets while reiterating China’s role as a key driver of global growth. He emphasized that in the context of trade disputes, there are no victors in tariff conflicts, trade wars, or technological confrontations.
