The Chinese yuan continued to face risks against the US dollar as traders monitor the developments around US trade policy. Trade tensions between the U.S. and China have exacerbated headwinds for the yuan. Tariffs and anticipated retaliatory measures have introduced further uncertainty, affecting market confidence.

At the same time, the 10-year government bond yield slipped below 1.9%. Further declines could exacerbate the yield differential with other major currencies, weighing on the yuan. Investors could remain cautious despite signs of manufacturing growth.

The Caixin Manufacturing PMI rose to 51.2 in March, its highest level in four months, surpassing market expectations. However, ongoing deflationary pressures continue to weigh on sentiment. Without a more sustained recovery in domestic demand, the currency may remain under pressure.

Meanwhile, Chinese policymakers have implemented liquidity measures and fiscal stimulus. However, excess liquidity could weaken the yuan if concerns about policy effectiveness grow.