By Summer Chen
HONG KONG (Reuters) – The yuan came under renewed pressure against the dollar on Thursday, giving up some of its initial gains as markets were affected by a Reuters report that said China may weaken its currency to counter the risks of U.S. trade tariffs.
At 0400 GMT, the yuan fell 0.03 percent to 7.2637 per dollar after trading in a range of 7.2565 to 7.2677.
China's top leaders and policymakers are considering letting the yuan depreciate in 2025 as they brace for higher US tariffs when Donald Trump returns to the White House, Reuters reported on Wednesday, citing sources.
The yuan and currencies across Asia fell against the dollar after the news on Wednesday.
Adding to the pressure on the currency, Chinese long-term yields fell to record levels on expectations of monetary easing, widening the yield disadvantage against the US to the largest level in 22 years.
Before the market opened, the People's Bank of China set the middle point rate, around which the yuan is allowed to trade in a 2% range, at 7.1854 to the dollar, little changed from the previous session and 584 points stronger than Reuters estimates. .
Currency traders are also awaiting the outcome of the key economic policy meeting to get a clearer picture of monetary and fiscal easing plans next year.
In an article following the Reuters report, Financial News, the publication of the People's Bank of China, said the basis for the “fundamentally stable” yuan exchange rate remains “solid” and that the currency is likely to stabilize and strengthen towards the end of this year. This helped the yuan recover some of its losses.
HSBC analysts said markets should wait for a statement from the Central Economic Work Conference, an annual meeting of Communist Party leaders, to confirm whether there has been a shift in Beijing's stance on the yuan.
“It is not surprising that Chinese authorities are considering the option of allowing the currency to weaken,” as a tool to offset the impact of tariffs, said Rong Ren Goh, a portfolio manager in the fixed income team at Eastspring Investments.
However, he expects a gradual and disciplined adjustment of the yuan rather than a sharp, unchecked depreciation of the yuan that could destabilize financial markets.
The value of the Chinese currency has declined for 10 consecutive weeks, affected by US President-elect Trump's threats to impose tariffs and the monetary policy difference between China and the United States.
It was traded at 7.2661 yuan to the dollar, up by about 0.19% in Asian trading.
