By Li Xing

The Chinese yuan remained stable, hovering near its recent high, while the 10-year government bond yield has risen above 1.81%. Following the release of January-February 2025 trade data, market participants are adopting a “wait-and-see” approach. Exports grew 2.3% year-on-year to USD 540 billion, missing the 5.0% forecast and significantly slowing from the 10.7% growth in December. Imports dropped 8.4% year-over-year to USD 369.4 billion, falling short of the expected 1.0% rise. The disappointing figures could indicate weaker economic momentum, limiting near-term appreciation of the yuan. However, stronger bond yields could cushion downside risks in the Chinese yuan.

China’s government remains committed to stabilizing the yuan amid escalating trade tensions with the U.S. The People’s Bank of China (PBoC) set the yuan’s midpoint rate at 7.1705 per U.S. dollar. While the central bank aims to maintain a stable exchange rate, the yuan could face continued challenges if trade tensions with the U.S. intensify.

Meanwhile, Chinese officials expressed willingness to negotiate with the U.S., reaffirming their commitment to protecting China’s interests. With ample reserves to counter external shocks, the government could have the capacity for additional fiscal support if needed. Advancing bond yields could attract foreign capital, supporting the yuan. However, the outlook remains uncertain, with markets keeping a close watch on the developments of Trump’s tariff policies.

Xing is Financial Markets Strategist Consultant to Exness