Offshore Yuan Edges Lower

The offshore yuan depreciated to around 6.89 per dollar on Friday, extending losses from the previous session as investors weighed fresh U.S. trade probes targeting several economies, including China. The Trump administration launched a new investigation under Section 301(b) to examine whether policies in key economies, particularly those related to forced labor, are “unreasonable or discriminatory” and harm US commerce. This follows a probe on Wednesday under the same section, which allows the president to impose tariffs on countries found to be engaging in unfair trade practices. The latest investigations are complicating US–China relations and threatening the fragile trade truce ahead of a high-stakes summit in Beijing. Externally, the yuan was also under pressure from a strengthening US dollar, fueled by safe-haven demand amid escalating Middle East tensions. Despite the declines, the offshore yuan remains on track for a weekly gain.

The offshore yuan edged lower to around 6.86 per dollar on Thursday, after a steady performance in the previous session, as investors weighed renewed tensions in U.S.–China trade relations. The US administration launched a probe under Section 301 of the Trade Act of 1974 targeting several economies, including China. The investigation raises the possibility of new tariffs, echoing previous reciprocal measures that were recently struck down by the Supreme Court. The move adds another layer of complexity to US–China relations and threatens a fragile trade truce ahead of a high-stakes summit in Beijing. China began 2026 with strong trade momentum. Exports surged 21.8% year-on-year to $656.6 billion in January–February, while imports climbed 19.8% to $443 billion. The yuan also faced pressure from a softer-than-expected daily fixing by the People’s Bank of China, which set the midpoint rate at 6.8959 per dollar, signaling a weaker official bias toward the currency.

The offshore yuan strengthened past 6.86 per dollar on Wednesday, marking a fourth consecutive session of gains as strong export growth continued to lift market sentiment despite Middle East tensions. China’s exports surged 21.8% year-on-year to $656.58 billion in January–February 2026, far exceeding forecasts and marking the fastest growth since October 2021. This underscored strong momentum in overseas demand before the outbreak of the Middle East conflict. The US–Israel campaign against Iran entered its 12th day, disrupting global energy markets and effectively closing the Strait of Hormuz. However, China is expected to withstand oil price shocks better than other major economies due to its vast crude stockpiles and diversified energy sources. Meanwhile, imports soared 19.8% to $442.96 billion in the first two months of 2026, far exceeding expectations and marking the strongest import growth since early 2022, driven by resilient domestic demand during the Lunar New Year holiday.