Offshore yuan stabilizes

The offshore yuan stabilized around 7.17 per dollar on Tuesday, finding support amid a broader pullback in the US dollar following President Trump’s announcement of a new round of tariffs targeting fourteen countries that have yet to reach comprehensive trade agreements with Washington.

The latest measures include a 25% levy on imports from major export-driven economies such as Japan and South Korea, intensifying global trade tensions and prompting a cautious tone in currency markets. Trump also signed an executive order delaying the implementation of reciprocal tariffs from July 9 to August 1, giving trade negotiators more time to broker deals and reducing immediate pressure on market sentiment.

Despite the uncertain geopolitical backdrop, the yuan managed to hold firm, bolstered by improving domestic sentiment and supportive policy signals from Beijing. One such signal came in the form of reports suggesting that Chinese authorities are considering doubling the quota for the southbound leg of the Bond Connect program.

If implemented, the move would allow mainland investors greater access to offshore bond markets, particularly in Hong Kong, reinforcing Beijing’s broader push to internationalize the yuan and deepen integration with global capital markets. Market participants view the potential quota increase as a sign of policy commitment to improving cross-border financial flows and supporting the yuan’s stability amid external headwinds.

In addition, the People’s Bank of China (PBoC) set the daily reference rate at 7.1534 per dollar—slightly weaker than Monday’s fix but still stronger than market forecasts. This suggests ongoing efforts by the central bank to manage expectations and curb excessive yuan depreciation, especially in light of renewed US-China tensions and lingering concerns over capital outflows.

The central bank’s steady hand has helped reassure markets that Beijing remains committed to exchange rate stability while still allowing for two-way flexibility.

Looking ahead, investors are turning their focus to a slate of key economic data releases, including June’s Consumer Price Index (CPI), Producer Price Index (PPI), and trade figures. Inflation is expected to remain subdued, reflecting ongoing domestic demand weakness and persistent deflationary pressures in certain industrial sectors. Any significant surprises in the data could influence expectations for further monetary easing or fiscal stimulus and, by extension, the trajectory of the yuan in the coming months.