The offshore yuan slid past 7.20 per dollar on Thursday, marking its third consecutive session of decline and touching its weakest level in nearly a month, as renewed U.S. dollar strength and escalating geopolitical tensions pressured the Chinese currency.
Offshore yuan slides on dollar strength
The greenback was buoyed by a significant legal development after the U.S. Court of International Trade in Manhattan ruled that former President Donald Trump had overstepped his executive authority in imposing the controversial "Liberation Day" import tariffs. The court ordered the tariffs to be vacated and permanently enjoined, casting doubt on the future of one of the central pillars of Trump’s trade policy. While the Biden administration is expected to appeal the decision, the ruling temporarily boosted global risk sentiment and the dollar, while weighing on Asian currencies like the yuan.
However, any potential easing in trade tensions was quickly overshadowed by fresh signs of technological decoupling between the world’s two largest economies. On the same day, the U.S. government moved to tighten export restrictions on high-tech goods, effectively prohibiting certain American firms from selling advanced semiconductor technologies and critical components to Chinese companies. The new restrictions reinforced investor concerns about deepening economic fragmentation, even as both Washington and Beijing had recently agreed to a limited tariff rollback and a temporary 90-day pause in new trade penalties.
In response to the latest U.S. actions, Liu Pengyu, spokesperson for the Chinese Embassy in Washington, issued a sharply worded statement, condemning what he described as the “overstretching” of national security concerns and the “malicious suppression” of Chinese firms. The rhetoric signaled Beijing’s growing frustration with U.S. trade and technology policies, potentially complicating the fragile détente currently in place between the two powers.
Internal factors influencing the currency
Domestically, the yuan also remains under pressure due to China’s weak macroeconomic backdrop. Recent data showed continued softness in industrial output, retail sales, and private investment, despite repeated efforts by Beijing to stimulate growth through rate cuts, bond issuance, and easing in property sector policies. Market participants are increasingly skeptical about the effectiveness of these stimulus measures, especially as concerns mount over structural imbalances and consumer confidence.
Looking ahead, traders will closely monitor both central bank actions and bilateral developments between the U.S. and China, particularly any signs of retaliatory measures from Beijing or further restrictions from Washington. In the meantime, the yuan appears likely to remain under depreciation pressure, especially as U.S. monetary policy remains relatively tighter and geopolitical risks persist.
