The Chinese yuan strengthened Tuesday to its highest level in more than five months as the United States removed China from its currency manipulator list.
The US Treasury Department on Monday stripped away its designation of China as a currency manipulator, days before US President Donald Trump and senior Chinese officials are expected to sign an initial trade deal.
The Chinese central bank continued to guide the yuan higher on Tuesday. The yuan’s daily reference rate against the US dollar increased to 6.8954, the strongest level since last August.
The yuan rose in Asia on Tuesday.
On the onshore market in Shanghai, the yuan traded at around 6.882 per US dollar, its highest level in more than five months.
In offshore trading, where the yuan moves more freely, one dollar could buy 6.877 yuan, also the strongest since last July.
The yuan has been climbing higher lately as the US-China trade deal moves closer toward becoming a reality. The US decision to lift China’s currency manipulator status is a “most precise and definitive” de-escalation of trade tensions to date, said Stephen Innes, chief Asia market strategist at AxiTrader.
“With the yuan strengthening ahead of the [phase one] deal signing, it’s indicating the potential for further improvement in trade relations,” he wrote.
Stocks around the region also recorded gains.
Hong Kong’s Hang Seng Index rose above the 29,000 level for the first time since last July.
Japan’s Nikkei 225 gained 0.8%. South Korea’s Kospi rose 0.9%. China’s Shanghai Composite edged up 0.2%.
One step forward
As tensions ease, nearly two years into the trade fight, the signing of the “phase one” US-China trade deal, expected Wednesday, will be a symbolically important moment — even if the reaction from investors is muted.
China said last week that Liu He, the country’s top trade negotiator, will travel to Washington to sign the agreement. Trump has said the signing will occur on Wednesday or “shortly thereafter.”
US officials and others familiar with the agreement have said it includes some cuts to existing tariffs and a pledge from China to purchase more American goods and services. China is also said to have agreed to make structural changes to how it deals with intellectual property rights.
A big caveat: It’s hard to know for sure what’s been agreed to since the text of the “phase one” agreement still hasn’t been released.
The deal also doesn’t mean the standoff between the world’s two largest economies is over. “Phase two” is expected to involve deeper issues that could be more difficult to resolve.
Plus, the United States continues to lobby allies to avoid Chinese telecom equipment company Huawei when building out next-generation 5G networks. No truce will be stable while the battle over technology continues behind the scenes.