The offshore yuan stabilized around 7.26 per dollar after two consecutive losing sessions, as investors took a pause amid Lunar New Year celebrations.
Offshore yuan steady amid Lunar New Year holiday
Market sentiment remained cautious ahead of the February 1 deadline, with growing concerns over persistent tariff threats from President Donald Trump. Last week, Trump announced plans to implement a 10% tariff on Chinese imports starting February 1, alongside a 25% tariff on goods from Mexico and Canada, raising fears of escalating trade tensions.
Chinese economy is still weak
Domestically, economic data signaled weakness, with China’s manufacturing sector contracting in January 2025 and services activity slowing sharply from December’s nine-month high. In response to economic pressures, the People's Bank of China injected a record 1.7 trillion yuan ($234 billion) into the financial system through three- and six-month reverse repos—the largest liquidity operation since October. This move underscored the central bank’s focus on maintaining yuan stability rather than introducing additional monetary easing.
