Offshore Yuan Extends Decline

The offshore yuan weakened to around 6.70 per dollar on Wednesday, extending losses from the previous session as a firmer US dollar and caution ahead of the highly anticipated Trump-Xi summit weighed on sentiment. The greenback remained supported after hawkish remarks from Federal Reserve officials reinforced expectations of another interest-rate hike later this year. Pressure on the yuan was also driven by subdued optimism surrounding the summit after preliminary talks that held last Sunday failed to produce an agreement to extend the tariff truce due to expire in November. While expectations for a major breakthrough remain limited, the meeting is still expected to address a range of sensitive issues, including artificial intelligence, Iran, Taiwan, and bilateral trade relations. Chinese President Xi Jinping and First Lady Peng Liyuan are scheduled to be welcomed by President Trump on Wednesday evening, marking Xi's first visit to the United States since 2015.

The offshore yuan traded around 6.69 per dollar on Tuesday, remaining close to its strongest level since July 2022 amid growing optimism over US-China talks. US and Chinese officials wrapped up a second day of talks on AI, investment and trade ahead of the Trump-Xi summit in the US on September 23–25. The highly anticipated meeting is expected to cover AI, the Iran conflict, export controls and rare-earth supplies. Investors are also watching for signs that the two countries can extend their trade truce before it expires in November. US Trade Representative Jamieson Greer said the two sides remain divided over the terms of an extension, while indicating that Washington could support a three- to six-month extension. On the monetary policy front, the one-year loan prime rate (LPR) was kept at 3%, while the five-year LPR remained at 3.5%. The decision comes as policymakers face less scope for easing amid the yuan’s continued appreciation and tighter policy among some major central banks.

The Chinese Yuan touched 6.69 against the USD, the highest since July 2022. Over the past 4 weeks, US Dollar Chinese Yuan lost 0.55%, and in the last 12 months, it decreased 5.92%.