The Chinese yuan was relatively volatile as traders reacted to the developments around trade tensions. China’s 10-year government bond yield retreated, stabilizing under 1.76%. The People’s Bank of China (PBoC) has maintained a strategy of setting firmer-than-expected midpoint fixings to guide the yuan, providing short-term stability amid rising trade tensions. However, the bond yield retreat suggests investor caution due to concerns over China’s long-term economic outlook and tariff threats.

Since January, the Chinese Central Bank has capped the yuan’s drop at 7.3 per dollar, using a daily reference rate to curb depreciation. The PBoC has delayed interest rate cuts and managed liquidity to stabilize the currency.

Looking ahead, the yuan may adjust as trade tensions escalate. Traders’ attention is on the National People’s Congress for clues on China’s economic policies, which could have an impact on the yuan’s future trajectory.