China's yuan hits near 3-year high on bets US tariff ruling will aid Chinese exports

SHANGHAI, Feb 24 (Reuters) - China's yuan hit the strongest level against the dollar in nearly three years on Tuesday as onshore traders returning from a nine-day holiday bet the U.S. Supreme Court ruling against President Donald Trump's tariffs will bolster Chinese exports.

Sentiment was also aided by renewed dollar weakness, as well as signs of elevated forex inflows following China's record current account surplus in the fourth quarter.

The yuan CNY=CFXS firmed roughly 0.1% to 6.8975 per dollar in early trading, having hit the strongest level since May 2023.

The dollar index =USD was steady in Asian trade on Tuesday after two sessions of declines.

The U.S. Supreme Court on Friday struck down Trump's emergency tariffs, leading him to pledge a new 15% levy on U.S. imports from all countries.

Analysts say the new tax regime could translate into lower taxes for Chinese exports, potentially bolstering the yuan.

Guosheng Securities expects a 8.4 percentage-point tariff reduction, potentially resulting in a 9.1% rebound in Chinese exports to the U.S. Goldman Sachs predicts a net reduction of around 5% in U.S. tariffs on Chinese goods.

Analysts at Morgan Stanley and J.P. Morgan expect tariff rates on China to decline to 24% and 27%, respectively, from 32% earlier.

The ruling "essentially restricts Trump's tariff abuse," Industrial Securities said in a report.

Although China still faces threats from U.S. tariffs under the Section 301 framework, the risk is manageable in the near term thanks to easing Sino-U.S. tensions, the brokerage said.

Trump will travel to China from March 31 to April 2 for a highly anticipated meeting with Chinese President Xi Jinping.

The yuan is also getting a tailwind from robust forex inflows as exporters' rush to convert dollar receipts into the local currency extended into the new year.

Monthly net forex inflows via Chinese banks totaled $79.9 billion in January, the third largest in history, according to official forex settlement data. It followed record inflows in December.

Meanwhile, preliminary data shows China's current account surplus hit a record high in the fourth quarter, thanks to strong exports as shippers diversified into non-U.S. markets.

"Looking forward, we expect a larger current account surplus in 2026 on wider goods trade surplus," Goldman said, expecting the yuan to appreciate gradually this year.