Yuan strengthens past key level as dollar weakens on tariff tensions

BEIJING

The Chinese yuan strengthened against the US dollar, with the exchange rate moving past the key 7-per-dollar threshold for the first time since September 2022, as weakness in the dollar followed political and trade-related developments involving the United States.

The yuan-dollar parity fell to 6.9929, marking the Chinese currency’s strongest level in more than three years, after a decline in the US Dollar Index linked to discussions surrounding Greenland.

US President Donald Trump’s tariff threats against about eight European countries -- tied to their compliance with his annexation of Greenland -- weighed on the dollar, triggering the broader decline in the US Dollar Index.

The yuan had been on a weakening trend against the dollar since March 2022. That decline accelerated after the US Federal Reserve began tightening monetary policy with interest rate hikes following the COVID-19 pandemic.

As the Fed raised rates, the yuan-dollar exchange rate moved above the 7-per-dollar level in September 2022. In the same month, the Chinese currency fell to its weakest level since the 2008 global financial crisis.

The recent move below the 7-per-dollar threshold signals a notable reversal after years of pressure on the yuan driven by global monetary tightening and shifting trade dynamics.