Yuan Held in Tight Range as China Weighs Stability Against Trade War Uncertainty

Gerik

Economic

China–U.S. Trade War

Forex

Summary:

Despite the weakening U.S. dollar and rising trade tensions with the U.S., China’s central bank has maintained a tightly managed yuan, signaling its intent to prevent volatility...

China Bets on Currency Stability Amid Escalating U.S. Tariff Pressures

Chinese businesses and investors are increasingly betting that Beijing will maintain a firm grip on the yuan as tensions with Washington escalate over renewed tariff threats. Despite the U.S. dollar's broad decline in 2025, the Chinese yuan has traded within a narrow band between 7.15 and 7.35 per dollar its weakest in over four years on a trade-weighted basis. This reflects an intentional balancing act by the People's Bank of China (PBOC), aiming to prevent destabilizing capital flows while preserving export competitiveness.

The persistent trade uncertainty has prompted Chinese corporates and households to hoard dollars, speculating they will secure more yuan in the future if depreciation occurs. Currency swaps used by exporters and importers to temporarily access yuan without giving up their dollar holdings have surged to $277.5 billion from January to May, marking a 10% increase year-on-year.

This behavior points to expectations of future yuan weakness, despite the currency gaining 1.5% against the dollar since President Trump reignited trade tensions in April. During that time, regional peers such as the Thai baht and South Korean won have appreciated by as much as 14%, further pressuring China's export pricing.

Central Bank Walks a Tightrope

The PBOC has been actively guiding market expectations. Through its daily reference rate (or “fix”), it has discouraged excessive yuan appreciation while taking subtle steps to ease capital outflows. Recent moves include expanding the Bond Connect scheme’s southbound leg to allow a broader set of investors brokerages, mutual funds, and insurers to invest in Hong Kong’s bond market. A new $3.08 billion quota for QDII (Qualified Domestic Institutional Investor) programs also supports this offshore push.

These tactics not only help relieve appreciation pressure but also reflect an effort to quietly rebalance capital allocation without triggering large-scale domestic conversions or panic moves.

A Delicate Policy Calculus

The PBOC faces a particularly complex task: allowing the yuan to remain competitive amid soaring U.S. tariffs (up to 55% under the latest framework) without sparking fears of a devaluation. China’s export sector, which accounts for roughly 20% of GDP, is already grappling with the fallout from U.S. protectionism and tariff uncertainty. With a critical deadline of August 12 approaching for China to negotiate with the White House to prevent the re-imposition of earlier suspended duties, the margin for policy error remains slim.

Analysts like Eugenia Victorino of SEB note that “China needs to maintain a very competitive currency with respect to other markets outside the U.S.” This is essential not only for trade positioning but also to signal global resilience amid growing economic decoupling pressures.

Rising FX Reserves, Diminishing Willingness to Convert

Official data show foreign exchange deposits climbed by $137.2 billion in the first five months of 2025, bringing the total to $990.1 billion a 19% increase year-on-year. This trend underscores a weakening willingness among corporates and households to convert their dollar holdings back into yuan, further validating expectations of future devaluation or continued tight management.

At the same time, the PBOC’s internal consultations reportedly surveying institutions on their views of recent dollar weakness suggest that monetary authorities remain highly attuned to cross-border capital dynamics.

Steady for Now, But the Pressure Builds

Beijing's preference for a stable yuan is clear, and its current band of 7.00–7.40 remains credible in the eyes of many economists, including ING’s Lynn Song. But as the August deadline for U.S.-China trade negotiations approaches and geopolitical frictions intensify, pressure is mounting.

The PBOC may be forced to walk an even finer line between economic stimulus, market stability, and global perception. Any unexpected lurch in the yuan either up or down could unleash pent-up market reactions, undermining both confidence and control. For now, China Inc. is preparing for the long game, hoping stability holds, but hedging as though the worst may still lie ahead.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Gerik

Stocks

Economic

Asian Equities Gain Ground While Wall Street Feels the Weight of Trump's Tariff Pressure

Asian shares edged higher on Tuesday in a mixed response to a volatile global outlook dominated by the resurgence of U.S. tariff threats. The gains came despite Wall Street suffering its steepest losses in nearly a month, as President Donald Trump ramped up pressure on key trading partners with new tariff deadlines.

Japan’s Nikkei 225 rose 0.4% to 39,734.62, South Korea’s Kospi advanced 1.2% to 3,096.29, and China’s Shanghai Composite climbed 0.6% to 3,492.41. The Hang Seng in Hong Kong added 0.2%. Meanwhile, Australia’s S&P/ASX 200 lagged slightly, slipping 0.1% to 8,583.50. The regional gains appear to reflect a mix of local resilience and investor optimism that new trade deals may still be forged before the deadline hits.

Wall Street Buckles as Tariff Fears Escalate

The picture was much gloomier on Wall Street. The S&P 500 fell 0.8%, posting its largest single-day drop since mid-June, while the Dow Jones Industrial Average sank 0.9% and the Nasdaq also lost 0.9%. Although the indexes remain close to record highs, the market reaction signals deepening anxiety over the future of international trade and U.S. economic policy.

Tesla bore the brunt of the sell-off, plunging 6.8% following a political spat between CEO Elon Musk and President Trump. Musk, previously one of Trump’s top donors, announced he would form a third party to protest the administration’s recent spending bill an unexpected twist that added to market unease.

Global Trade Flashpoint: Tariffs, Deadlines, and Political Chess

At the core of the market’s stress is Trump’s latest tariff salvo. On Monday, his administration issued formal letters to Japan and South Korea stating that a 25% tariff on their exports to the U.S. will begin on August 1, citing long-standing trade imbalances. Additional tariff announcements targeting Malaysia, South Africa, Kazakhstan, Laos, and Myanmar also rattled markets and trading desks.

This timeline revives fears of a broader global economic deceleration, particularly as the original 90-day reprieve granted in April in the hope of facilitating negotiations expires this week. Analysts warn that higher tariffs could constrict trade volumes, raise input costs for businesses, and lower consumer confidence, all of which risk tipping global growth further into uncertainty.

Market Tone: Nervous, But Not Yet Panicked

Despite the dramatic developments, the overall tone of the markets remained cautiously defensive rather than chaotic. “With the August 1 deadline serving as a negotiation buffer, the current tape suggests that markets are hedging, not fleeing,” said Stephen Innes, managing partner at SPI Asset Management. He likened the moment to a poker game where “the joker just hit the felt, but no one’s shoved their stack.”

Mizuho Bank echoed the sentiment, calling the latest extension and tariff threats “a distraction from festering, and possibly widening, tariff risks,” suggesting the situation may deteriorate unless substantive progress is made.

Currency and Commodity Markets Signal Wariness

In currency markets, the U.S. dollar showed minimal movement, trading at 146.05 yen, slightly up from 146.01. The euro edged higher to $1.1746 from $1.1714. Oil prices continued to soften, with U.S. crude down 30 cents to $67.63 per barrel and Brent crude losing the same amount to settle at $69.28, reflecting ongoing concerns about global demand amid uncertain trade conditions.

Global markets remain suspended in a delicate balance, with the Trump administration’s tariff strategy reintroducing a level of unpredictability that investors had hoped was behind them. With the August 1 deadline drawing near, all eyes are now on whether foreign governments yield to U.S. demands or whether a new round of retaliatory tariffs further destabilizes the global economic landscape.

Source: AP

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

China–U.S. Trade War

Beijing Issues Firm Response to Trump’s Tariff Threats and Supply Chain Shifts

China has raised the stakes in the unfolding trade standoff with the United States, warning the Trump administration against reactivating high tariffs on Chinese goods and vowing to retaliate against countries that strike exclusive supply chain deals with Washington. The warning, published Tuesday in the People's Daily under the pseudonym “Zhong Sheng” (a voice often used to express the government’s official line on foreign affairs), comes as the August 1 deadline for new U.S. tariffs looms.

While President Trump delayed the majority of his planned April tariffs maintaining only a 10% rate to give space for trade negotiations, he has now started issuing formal notices to multiple trade partners regarding much steeper tariffs. China faces an especially severe hike, with duties set to exceed 100% on certain goods if no agreement is reached by August 12.

Tariff Framework Under Pressure

The fragile trade truce struck in June now appears increasingly unstable. Despite hopes that it might pave the way for de-escalation, details remain murky. Investors and policy watchers on both sides of the Pacific fear a renewed tit-for-tat conflict could again rattle financial markets, dampen consumer confidence, and choke trade between the world’s two largest economies.

The People’s Daily editorial accused Trump’s administration of engaging in economic "bullying" and made clear that Beijing views diplomacy and cooperation not coercion as the only legitimate avenue forward. “Practice has proven that only by firmly upholding principled positions can one truly safeguard one's legitimate rights and interests,” it asserted.

Supply Chain Realignment: A Red Line for Beijing

Perhaps more striking than its rebuke of tariffs was China’s warning to third-party countries considering supply chain pacts that sideline Beijing. Specifically citing Vietnam’s recent deal with the U.S. which reduced tariffs on transshipped goods from 46% to 20%, while still taxing China-origin goods at 40% the article condemned any move that undermines China's role in global production networks.

“China firmly opposes any side striking a deal that sacrifices Chinese interests in exchange for tariff concessions,” the editorial said. “If such a situation arises, China will not accept it and will respond resolutely to protect its legitimate interests.”

This signals that China may now treat supply chain exclusion as a strategic threat on par with direct tariffs, likely complicating regional dynamics for nations like Vietnam, Thailand, and South Korea, which are all balancing relations with both superpowers.

Tariff Averages Reflect Escalation

According to the Peterson Institute for International Economics, average U.S. tariffs on Chinese exports now stand at 51.1%, with China’s average duties on U.S. goods at 32.6%. Unlike earlier phases of the trade war, both nations have extended duties across nearly the entirety of bilateral trade, suggesting limited room for further escalation without direct economic fallout.

The editorial’s tone and content confirm that Beijing views the coming weeks as critical. Should Washington proceed with its tariff hike on August 1 and fail to carve out a compromise deal with Beijing by August 12, another disruptive trade clash appears all but certain.

The broader message is clear: Beijing is drawing lines not just around its own trade with the U.S., but also around its regional influence. Countries that align too closely with American protectionist measures may find themselves in China’s crosshairs both diplomatically and economically. As global supply chains continue to fragment along geopolitical lines, the risk of permanent decoupling between China and the West edges closer to reality.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Trump's Tariff Threat Puts Swiss Timepiece Industry on Edge as Tourists Retreat from Lucerne

The glittering watch boutiques of Lucerne, Switzerland long a magnet for high-spending international tourists are feeling the strain of President Donald Trump’s renewed tariff pressures. In recent months, the threat of a 31% U.S. import duty on Swiss goods, up from the previously proposed 20% for the EU, has created ripples of uncertainty across one of the country’s most prized export sectors: luxury watches.

Although Trump ultimately paused the full tariff implementation and extended the deadline to August 1, the initial shock sent Swiss watchmakers scrambling to reroute inventory to the U.S. in anticipation. As a result, export volumes have fluctuated unpredictably, with January–May unit exports down nearly 5% year-on-year, according to the Federation of the Swiss Watch Industry (FH). While total export value has slightly risen thanks to the enduring strength of ultra-premium models the overall trend signals weakness, particularly in volume.

Currency Pressures and Fading Chinese Demand Compound the Pain

Beyond the tariff saga, Swiss exporters are contending with a surging franc that has grown stronger amid global trade uncertainty. The franc's rise has made Swiss watches even more expensive for foreign buyers, compounding the slowdown caused by tepid Chinese demand once a pillar of growth for the industry.

"That obviously really put the brakes on," said Ken May, boutique manager at Hublot in Lucerne, referring to Trump’s abrupt tariff escalation.

Yves Bugmann, president of the FH, acknowledged that exporters can no longer rely on the U.S. and China alone. “We have to open other markets. We have to look for other opportunities,” he said, as the industry braces for what could be its lowest wristwatch export volumes since the pandemic-plagued year of 2020.

Lucerne’s Retail Scene Reflects the Strain

On Lucerne’s famed Grendelstrasse, where window displays from Rolex, Patek Philippe, and Breitling shimmer behind pristine glass, foot traffic is visibly lighter this summer. Sales staff report that tourists are arriving in smaller numbers, and those who do are more budget-conscious.

Boutique manager Michael Haas of Breitling noted, “Everything is just a bit slower than last year. We're in a luxury business, and as a rule, that's where people save first when the going gets tougher."

Even in Patek Philippe’s upstairs salon where watches can cost nearly 3.8 million francs a sense of caution prevails. The boutique’s signature white-coated watchmakers still serve trays of customized timepieces to elite clients, but the mood is subdued.

An Industry at a Crossroads

Swiss watchmakers, famed for precision and prestige, now find themselves navigating geopolitical turbulence that threatens their most profitable markets. With Trump’s tariff deadline looming on August 1 and no clarity on whether negotiations will ease tensions or escalate them, exporters are watching closely.

If Swiss watch exports continue to slump in volume despite stable value, the pressure will intensify to diversify into emerging markets and streamline production costs. For now, Switzerland’s luxury timepiece industry is ticking, but under tension and with less time than ever to adapt.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Daniel Carter

Economic

Political

Bangladesh will hold further negotiations with the United States to push for deeper tariff cuts, even as US President Donald Trump slapped a 35% levy on goods from the South Asian nation.

Officials are scheduled to hold crucial trade negotiations with the Trump administration from July 9-10 to seek a solution, Commerce Adviser to the interim government Sk. Bashir Uddin said in an interview from Washington.

“We will give and try our best to find mutually win-win proposition,” he said, adding that the goal is to find a “common ground.”

Dhaka is reviewing the draft documents from the US trade representative and will assess the way ahead, said Uddin, who is also heading the delegation. “This is an uncertain world,” he said, referring to the challenges ahead in talks with the US.

The Trump administration sent the first tranche of letters to various countries on Monday, detailing the levies that the US will impose on products from them. While the tariff on Bangladesh is slightly lower than the 37% proposed earlier, it still risks hurting the nation's already fragile economy and its garment exports.

The South Asian nation's main rival in the ready-made garment sector, Vietnam, secured a more favorable 20% tariff, placing Bangladesh at a competitive disadvantage.

The upcoming discussions offer a pathway, said analysts at Dhaka-based BRAC EPL Research. “Proactive diplomacy could still yield positive outcomes,” they added.

Source: Bloomberg Europe

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Australia’s Central Bank Stuns Markets With Steady Rate Decision Amid Mixed Economic Signals

In a move that defied both market forecasts and household hopes, the Reserve Bank of Australia (RBA) held its benchmark cash rate unchanged at 3.85% following its July policy meeting. The decision shocked traders who had priced in nearly a full probability of a 25-basis-point rate cut to 3.60%, citing softening inflation and weak consumer demand.

The board vote revealed a rare split: six members opted to hold rates, while three favored a cut. This outcome indicates growing internal debate within the RBA over how to balance domestic disinflation with the broader risks posed by global uncertainty, including President Trump’s escalating tariff threats.

Market Reaction and Updated Outlook

The Australian dollar immediately jumped 0.8% to $0.6545, while bond futures saw sharp declines, with three-year futures falling 13 ticks. The decision shifted market expectations for rate cuts: while a cut is still seen as highly likely at the next meeting in August, the anticipated easing path now bottoms out closer to 3.10% rather than the previously forecast 2.85%.

Economists had become increasingly confident in a July cut after the trimmed mean inflation rate hit 2.4% in May, falling squarely within the RBA’s 2–3% target band. Coupled with sluggish retail sales and an economy that barely grew in Q1, many believed conditions were ripe for further stimulus.

Rationale for Holding

In its statement, the RBA emphasized the need for more time and data to confirm that inflation is on a sustainable path toward its mid-point target of 2.5%. The board also highlighted that monetary policy remains flexible and ready to act should international developments significantly impact Australian activity or inflation.

The labor market’s resilience remains a key factor. With the unemployment rate steady at 4.1%, the RBA appears reluctant to risk overheating the housing market further or triggering a wage-price spiral without firm disinflation confirmation.

Treasurer Jim Chalmers acknowledged the disappointment the decision would cause for many Australians, noting that the economy has made “substantial and sustained progress” on inflation, with two cuts already delivered earlier this year. However, he echoed the central bank’s cautious tone, recognizing ongoing global trade tensions as a complicating factor.

Uncertainty Ahead

Oxford Economics and Capital Economics both expressed concern that the RBA may be falling behind the curve by not acting more decisively. With global volatility increasing—especially amid President Trump’s newly announced tariffs on key trading partners—the RBA is walking a fine line between caution and complacency.

The decision leaves the door wide open for an August cut, particularly if Q2 inflation data, due later this month, supports the disinflation trend. However, the magnitude of any future easing now appears more modest than previously expected.

As Australia navigates a delicate recovery, the RBA’s restraint suggests it is preparing for a world where inflation proves sticky, trade risks escalate, and consumers continue to tighten their belts.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Political

Middle East Situation

Wartime Sparks Innovation as Israeli Defense Startups Attract Global Interest

Israel’s defense technology sector is undergoing a major transformation, fueled by wartime innovation and battlefield-driven urgency. In the wake of the October 7, 2023, Hamas attack and the ensuing war in Gaza, a wave of new startups has emerged, many led by army reservists applying frontline experience to develop practical, cutting-edge solutions for modern combat.

One such example is SkyHoop, a startup founded by 36-year-old reservist Zach Bergerson, which developed a mobile device to detect incoming drones a direct response to real-time threats encountered during military service. Now moving beyond stealth mode, the technology is being piloted in Ukraine and is under consideration by the U.S. Defense Department.

A Surge in Startups and Investment Since 2023

According to Startup Nation Central, over one-third of Israel’s defense startups were established since the Gaza war began. Venture capital interest, previously hesitant due to regulatory risks, has intensified. U.S. and Israeli funds are now actively backing firms developing battle-tested tech, including Protego Ventures, founded by reservist Lital Leshem, which has reviewed over 160 defense tech firms and raised $100 million for investment.

The appetite is being driven not just by innovation, but by the practical advantages of combat-hardened systems. Israel’s recent 12-day air war against Iran, during which it intercepted 86% of incoming ballistic missiles, reinforced its reputation for high-performance defense systems.

Europe Emerges as Strategic Target Market

Although the U.S. has long been viewed as the primary market, Israeli startups are pivoting towards Europe. This shift aligns with U.S. President Donald Trump’s push for European NATO members to increase defense contributions. A newly proposed NATO spending plan envisions a defense budget equal to 5% of GDP, vastly expanding the procurement landscape.

Israeli defense exports already reached a record $14.8 billion in 2024, with Europe accounting for more than 50% of that total up from 35% in 2023. This demand is being driven by the Russia-Ukraine conflict, as European nations replace donated equipment with modern gear, much of it sourced from Israel.

Innovation vs. Legitimacy: The Political Dilemma

Despite Israel’s technical successes, the growing death toll and humanitarian toll in Gaza where over 57,000 Palestinians have reportedly been killed has fueled international criticism and sparked calls to boycott Israeli-made weapons. Brigadier General Yair Kulas, head of Israel’s defense export agency, acknowledged that reputational risks pose a “huge challenge,” even as buyers continue seeking the most effective technologies regardless of political pressure.

The Next Frontier: Integration and Scale

Avi Hasson, CEO of Startup Nation Central, likens the current moment to the mobile revolution of two decades ago. Today’s battlefield innovations may soon shape not only the future of warfare, but also the direction of Israel’s defense industry. Larger firms like Elbit Systems, Rafael, and Israel Aerospace Industries may either accelerate in-house development or seek acquisitions to stay ahead.

The convergence of high-tech civilian talent with direct combat experience is proving to be a potent engine of innovation. As Israeli startups navigate global markets and geopolitical headwinds, the defense sector is entering a new phase defined not just by cutting-edge technology, but also by its entanglement with global diplomacy and public perception.