Yuan recovers from US tariff blow to hit one-month high

By Jiaxing Li

HONG KONG, April 29 (Reuters) - China's yuan strengthened to a one-month high against the U.S. dollar on Tuesday, recouping all the losses inflicted by the Trump administration's latest round of tariffs as Beijing signalled a commitment to currency stability.

The yuan CNY=CFXS finished the domestic trading session at 7.2653 per dollar, its strongest close since March 31. It has now recovered all its losses since April 2, when U.S. President Donald Trump ordered a slate of import tariffs and singled out China with the heaviest levies.

The offshore yuan CNH= climbed 0.3% to 7.2730 per dollar on Tuesday in Asian trade.

That strength comes as the greenback remains subdued after U.S. Treasury Secretary Scott Bessent told CNBC it was "up to China to de-escalate" tariffs, leaving investors unsure whether the Sino-U.S. trade war was abating.

That followed comments from the People's Bank of China Deputy Governor Zou Lan underlining a commitment to currency stability. He reiterated in a press conference on Monday that the bank would firmly correct pro-cyclical behaviours and prevent overshooting risks.

"We do not see RMB devaluation as part of China's retaliation toolkit to U.S. tariffs", HSBC analysts said in a note.

Chinese authorities have their own motivations for preventing the yuan from depreciating "too fast and by too much", as they need to guard against capital outflow and promote trade with other partners, they said.

China has exempted some U.S. goods from tariffs and while it has advanced this year's stimulus measures to support the economy, it is holding off making additional measures, betting Washington will blink first in the trade standoff.

Before the market open, the central bank set the midpoint rate CNY=PBOC around which the yuan is allowed to trade at 7.2029 per dollar, its strongest since April 7. The yuan is permitted to trade 2% either side of the midpoint.

The central bank has tightened its daily yuan official guidance for five straight business days, suggesting it is unwilling to see a sharp depreciation, according to Christopher Wong, currency strategist with OCBC.

"A softer magnitude of increase in USDCNY fixing should calm sentiments for RMB," he said.

Based on Tuesday's official guidance, the yuan is allowed to drop as far as 7.3470.

Investors are also waiting for China's April manufacturing data due on Wednesday for signs of any impact from the U.S. tariffs.

Key onshore vs offshore levels:

• Overnight dollar/yuan swap onshore -6.10 pips vs. offshore -6.10

• Three-month SHIBOR SHIBOR= 1.8% vs. 3-month CNH HIBOR 1.8%