(May 23): China’s offshore yuan extended its advance after US President Joe Biden said he’ll discuss tariffs on Chinese imports with Treasury Secretary Janet Yellen upon return from his Asia trip.
The currency jumped as much as 0.7 percent to 6.6549 per dollar, the strongest level since May 5. It had risen 1.5 percent last week, the most since 2020, in response to easing lockdowns in Shanghai. Sentiment was also boosted by the reduction of a key interest rate for long-term loans on Friday by Chinese banks.
“A reduction of US-China tariff is taken to be positive for US-China relations and that translates to yuan gains,” said Fiona Lim, a senior currency analyst at Malayan Banking Bhd. “However, we are wary that mentions of tariff reduction have surfaced time and again,” she said.
Biden has maintained most of the tariffs imposed by his predecessor, Donald Trump, including duties on more than $300 billion in Chinese imports.
But the president has come under pressure from some economists and lawmakers and the US Chamber of Commerce to reduce or eliminate the tariffs with inflation running at the hottest pace in four decades.
US economists say lifting the tariffs would help to ease inflation, but aides within the administration don’t to want to suspend tariffs and risk appearing soft on China ahead of the November midterms.
Other Asian currencies along with the Australian dollar received a boost from Biden’s comments. The Aussie rose as much as 1.2 percent to 0.7126 per greenback at 3:01 pm in Hong Kong.
Any easing of tensions between US and China can set a more benign environment for constructive Aussie-Sino relations as well, Maybank’s Lim added.