China’s yuan briefly hits weakest against dollar since Nov 2023

China’s yuan hit a 14-month nadir on the first trading day of 2025, but it quickly bounced from lows of 7.31 per dollar, which traders say could reflect authorities’ desire to rein in the currency’s slide before Donald Trump returns to the White House.

The onshore yuan fell to 7.31 per dollar at the market open, piercing below 7.3 for the first time since Nov. 3, 2023. However, trades below that level disappeared from trading platforms later.

Responding to a Reuters request for comment, China’s forex market regulator said both trading counterparties canceled their orders at 7.31 per dollar. The regulator didn’t say why the orders were canceled.

Analysts and traders say the cancellation could be linked to a ‘fat finger’ error, or due to guidance from regulators who are keen to keep the yuan stable ahead of a looming trade war with the US

The cancellation shows that “authorities think keeping the yuan stronger than the 7.3-per-dollar level at this stage is reasonable,” said a trader at a Chinese bank.

China needs to closely monitor US policies under Trump and adjust countermeasures accordingly, including yuan policies, said the trader, who declined to be named.

The US President-elect has threatened to impose fresh tariffs on Chinese imports, keeping investors on edge about the impact on yuan-denominated assets.

The yuan lost 2.8% against the greenback in 2024 in its third straight year of losses, hit by a triple-whammy of a broadly stronger greenback, falling Chinese yields and rising trade tensions with other economies.

On Thursday, China’s 30-year treasury yield fell below 1.9% to a record low, reflecting the gloomy outlook on China’s economy and adding to depreciation pressure on the yuan.

China’s central bank continued to set a strong guidance rate, underscoring authorities’ unease over the yuan’s recent declines.

Prior to market open, the People’s Bank of China set the yuan midpoint at 7.1879 per dollar, 1,037 pips stronger than Reuters’ estimate.

The yuan had been trading a whisker below 7.3 per dollar over the past two weeks, a level seen by some in the market as a major threshold.

Reuters reported last month that China’s top leaders and policymakers are considering allowing the yuan to weaken this year as they brace for higher US trade tariffs Trump.

The US dollar kicked off 2025 on the front foot on Thursday after a strong year of gain against most currencies, with the yen sliding toward its lowest level in more than five months as investors ponder US interest rates staying higher for longer.

Market focus early in the year will be on the incoming Trump administration and its policies that are widely expected to not only boost growth but also add to price pressure, underpinning US Treasury yields and boosting dollar demand.

A wide interest rate difference between the US and other economies has cast a shadow over the currency market, resulting in most currencies declining sharply against the dollar in 2024.

None more so than the yen which fell more than 10% for its fourth year of decline. It was weaker on the first trading day of 2025 at 157.54 per dollar, not far from the five-month low touched on Tuesday, keeping traders wary of intervention from Japanese authorities.

Markets in Japan are closed for the rest of the week.

The dollar index, which measures the US currency against six others, was at 108.53 in early trade, just shy of the two-year high touched on Tuesday. The index rose 7% in 2024.

“The US dollar is likely to remain in pole position (this year) given its still-high yield, US exceptionalism and its safe-haven appeal in uncertain times,” said Saxo Chief Investment Strategist Charu Chanana.

Weaker growth outlook outside the US, geopolitical tension in the Middle East and the Russia-Ukraine war have added to demand for the dollar.

The euro was steady at $1.0353 after dropping more than 6% in 2024. Traders anticipate deeper interest rate cuts from the European Central Bank in 2025, with markets pricing in 113 basis points of easing versus 42 bps of cuts priced in from the US central bank.

Sterling last fetched $1.2519. It fell 1.7% last year but was nevertheless the best-performing G10 currency versus the dollar, mainly as the British economy held up better than was widely expected.

The Australian and New Zealand dollars both started the new year higher but remain close to the two-year lows touched on Tuesday. The Aussie was 0.1% higher at $0.6199 after a drop of around 9.2% in 2024, its weakest yearly performance since 2018.

The kiwi clocked an 11.4% decline last year, its softest performance since 2015. On Thursday, it rose 0.27% at $0.5603.

Agencies