Yuan hits highest in nearly two weeks on Trump-Xi call, Fed rate cut bets
By Jiaxing Li
HONG KONG, Nov 25 (Reuters) - China's yuan rose to a near two-week high against the dollar on Tuesday, as an upbeat call between U.S. President Donald Trump and the Chinese leader Xi Jinping helped ease tensions between the two countries.
Growing expectations of a Federal Reserve rate cut next months also underpinned the yuan although the dollar has managed to broadly hold its own against its global peers.
By 0311 GMT, the yuan CNY=CFXS was 0.14% higher at 7.0945, the strongest level since November 14.
The offshore yuan fetched 7.0939 yuan per dollar CNH=, up about 0.18% in Asian trade.
Sentiment got a lift after Trump touted relations with China as "extremely strong" on Monday following a call with Xi, raising hopes of a durable trade deal between the two countries following a framework agreement struck last month. The yuan has been pushed around by the prolonged U.S.-China trade tensions, though the recent rhetoric from both sides have tempered market worries.
Prior to the market opening, the People's Bank of China set the midpoint rate CNY=PBOC at 7.0826 per dollar, its strongest since November 17, and 230 pips firmer than a Reuters' estimate. The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
The yuan is up 0.4% against the dollar this month, and 2.9% firmer this year. The steady appreciation of the tightly-managed currency has reignited speculation that Beijing is renewing its campaign to drive the yuan's global use, analysts say.
"We expect USD/CNY will continue fluctuating with a gradual downward pressure," analysts at Nanhua Futures wrote in a note.
The yuan's underlying upward momentum against the dollar continues to build with rising seasonal settlement demand towards year-end, they added.
The higher chance of a Fed rate cut in December also helped to underpin risk assets. Traders are now pricing in an 81% chance of a cut next month versus 42% a week earlier, CME FedWatch showed.
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