Yuan softens as markets await US tariff deadline

SHANGHAI, July 7 (Reuters) - China's yuan eased against the greenback on Monday as investors turned cautious ahead of U.S. President Donald Trump's Wednesday deadline for agreeing deals on trade tariffs, seeking cues on the currency's near-term direction.

The United States is close to finalising several trade agreements in the coming days and will notify other countries of higher tariff rates by July 9, Trump said on Sunday, with the rates scheduled to take effect on August 1.

Trump said that countries aligning themselves with the "Anti-American policies" of BRICS will be charged an additional 10% tariff. BRICS is an intergovernmental organisation comprising developing countries including China.

Following Trump's comments about tariffs, the spot yuan eased slightly, while the dollar index =USD, which measures the U.S. currency against six peers, edged up.

The spot yuan CNY=CFXS opened at 7.1641 per dollar and was last trading at 7.1715 as of 0312 GMT, 62 pips lower than Friday's late session close and 0.29% weaker than the official yuan midpoint.

"Markets broadly believe there is little basis for a sharp, one-way move in the yuan, either weaker or stronger," said analysts at Huatai Futures.

"Even in the face of external shocks, the yuan is expected to hold above the policy floor near 7.3," they said, adding that the currency pair is expected to trade in a narrow two-way range between 6.8 and 7.3.

Prior to the market opening, the People's Bank of China set the midpoint rate CNY=PBOC at 7.1506 per dollar, its strongest since November 8, 2024, and 120 pips firmer than a Reuters estimate.

"The consistent bias to strength in recent weeks is an important signal in our view of Chinese policymaker willingness to allow currency appreciation in response to fundamental considerations," said analysts at Goldman Sachs.

"We think that policymakers will remain tolerant of currency appreciation if the trade detente with the U.S. extends through and beyond the summer," they said.

The offshore yuan traded at 7.1721 yuan per dollar CNH=, down about 0.11% in Asian trade.

The dollar index =USD was 0.096% higher at 97.06.

LEVELS AT 0312 GMT