China's yuan hits seven-week low on Trump's sweeping tariffs

SHANGHAI, April 3 (Reuters) - China's yuan slumped to a seven-week low against the U.S. dollar after President Donald Trump unveiled sweeping reciprocal tariffs that were particularly heavy on China and its trading partners, piling depreciation pressure on the currency.

Trump said on Wednesday he would impose a 10% baseline tariff on all imports to the United States and higher duties on dozens of countries. That included fresh tariffs of 34% on imports from China, adding to an existing 20% levy.

The onshore yuan CNY=CFXS fell to 7.3060 per dollar, its weakest since February 13, while the offshore yuan CNH=D3 dropped to 7.3485 per dollar in the late New York session, the lowest level since February 3.

As traders waited for China's response to tariffs and its currency defence, the People's Bank of China (PBOC) set the midpoint rate CNY=PBOC, around which the yuan is allowed to trade in a band of 2%, at 7.1889 per dollar, stronger than market estimates, in a sign it aims to contain depreciation.

"The immediate response is likely to see further depreciation pressure, but we expect the PBOC to continue with its currency stability objective and we hold our 7.00 to 7.40 forecast band for this year," said Lynn Song, chief economist for Greater China at ING.

"We don’t expect intentional devaluation as a response as it would only prompt further tariffs and it would undo the benefits from currency stability."

Trump has also signed an order to close a trade loophole used to ship low-value packages worth $800 or less duty-free from China, known as "de minimis". The order covers goods from China and Hong Kong and will take effect on May 2.

"The PBOC has maintained the stability of the midpoint fixing, which means it has not changed its firm stance on maintaining FX market stability," said Ken Cheung, chief Asian FX strategist at Mizuho Bank.

Traders said China's major state-owned banks were seen busy selling US dollars to buy yuan on Thursday, in both onshore and offshore spot markets.

The spot yuan CNY=CFXS opened at 7.2994 per dollar and was last trading at 7.3033, 352 pips lower than the previous late session close and 1.59% weaker than the midpoint.

China has urged the United States to immediately cancel unilateral tariff measures and properly resolve differences with trading partners through equal dialogue, the commerce ministry said on Thursday.

The dollar index =USD, which measures the currency against six major peers, was 0.107% lower at 103.05.

LEVELS AT 0222 GMT

RM:clarence.fernandez.thomsonreuters.com@thomsonreuters.net))