The offshore yuan depreciated past 7.28 per dollar, marking its third consecutive session of losses, as markets reacted to escalating trade tensions and geopolitical uncertainty.
Offshore yuan extends decline
Investor sentiment took a hit after U.S. President Donald Trump announced plans to impose 25% tariffs on automobiles, semiconductors, and pharmaceuticals, signaling a renewed phase of economic confrontation between the world's two largest economies.
Adding to concerns, Donald Trump Jr., the president’s eldest son, suggested that the United States should be prepared to confront potential military challenges from China while keeping diplomatic channels open. His remarks fueled speculation about rising geopolitical tensions, increasing uncertainty for global markets already wary of U.S.-China relations. The ongoing trade dispute, which reignited during Trump's second term, has seen both countries implement tit-for-tat measures, with China responding by imposing tariffs on American goods and targeting U.S. firms operating within its borders.
China real estate market showed signs of stabilizing
Meanwhile, on the domestic front, China's real estate market showed signs of stabilizing, with new home prices falling 5% year-on-year in January 2025, a slight improvement from the 5.3% decline in December. This marked the smallest drop since July 2024, suggesting that Beijing's policy measures to support the struggling property sector may be gradually taking effect. However, challenges remain as developers continue to face liquidity constraints and sluggish demand persists.
What to monitor
Looking ahead, investors will closely watch any further policy signals from Chinese authorities, particularly regarding additional stimulus measures or potential countermeasures against U.S. tariffs. The yuan’s trajectory will also be influenced by broader market trends, including Federal Reserve policy moves and global risk sentiment.
