ey Points:
- USD/CNH climbs to 7.2391 as PBOC sets midpoint rate at 7.1754, its weakest since January 20.
- The dollar index (USDX) remains near a five-month low at 103.38, limiting USD strength.
- Resistance seen at 7.2410, with traders monitoring trade policy shifts and Fed guidance.
Yuan Eases as PBOC Signals Cautious Stance
The Chinese yuan weakened against the U.S. dollar on Thursday, with USD/CNH rising to 7.2391, reflecting a 0.12% decline in offshore yuan trading. The People’s Bank of China (PBOC) set its midpoint rate at 7.1754 per dollar, marking its weakest fixing in two months. This move suggests that Chinese policymakers are keen to prevent excessive yuan appreciation, even as the dollar remains under pressure from weak economic data and ongoing trade uncertainties.
Market participants see this as a strategic move ahead of U.S. trade policy reviews in April, as President Donald Trump’s tariff stance continues to create uncertainty. Despite the dollar’s 4% decline this month, the yuan has only appreciated by less than 1%, indicating that the PBOC is actively managing its currency stance rather than allowing a rapid appreciation.
Technical Analysis
The USD/CNH pair is trading near 7.23877, up 0.17%, after hitting an intraday high of 7.23911. The price is testing a key resistance level at 7.24105, which has acted as a ceiling in previous sessions. The moving averages (MA 5,10,30) show a bullish alignment, supporting the uptrend, while the MACD histogram signals increasing momentum.
Picture: USD/CNH extends gains but struggles near resistance, as seen on the VT Markets app
If USD/CNH breaks above 7.241, further upside could push it toward 7.245 or higher. However, failure to hold gains may result in a pullback toward support at 7.225. Traders should watch for China’s economic updates and U.S. monetary policy cues, as they could drive further movement in the pair.
Market Sentiment and Future Outlook
Traders anticipate limited yuan appreciation beyond 7.22, barring any major shifts in economic data or trade policy. With the PBOC maintaining a controlled approach to currency fluctuations, further strengthening of the yuan may require stronger economic indicators or a shift in U.S.-China trade dynamics.
Meanwhile, investment banks have raised their growth forecasts for China, leading to a more optimistic outlook on the yuan. This shift has softened bearish sentiment, as early signs of economic recovery bolster confidence in China’s ability to sustain growth. Additionally, the PBOC’s decision to hold benchmark lending rates steady for the fifth consecutive month aligns with market expectations, reinforcing a measured approach to monetary policy while maintaining stability in financial markets.
