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1202 2025

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Yuan Under Pressure: China Bills Issuance, U.S. Tariffs Add Volatility

Bas Kooijman

The Chinese yuan could remain under pressure, while the 10-year government bond yield was capped between 1.60% and 1.63%. China’s central bank has announced plans to issue 60 billion yuan in bills in Hong Kong this Friday, with 40 billion yuan allocated for 3-month bills and 20 billion yuan for 1-year bills. The tender, scheduled to settle on February 18, will be available for competitive bidding via the Hong Kong Monetary Authority’s Central Moneymarkets Unit. While this measure aims to stabilize the currency, the outlook for the yuan remains bearish, with further depreciation likely, depending on global trade conditions and U.S.-China relations. The subdued bond yield is expected to persist, as the central bank may need to maintain accommodative policies to support the economy.

President Trump’s tariff policies continue to add volatility to the currency market. The U.S. plans to raise aluminum tariffs from 10% to 25%, effective March 12. While China’s share of U.S. steel imports is less than 2% of the 29 million net tons imported last year, these tariffs contribute to uncertainty, heightening concerns over trade tensions. The yuan’s volatility is likely to continue, with potential capital outflows further weighing on the currency if interest rate spreads continue to widen.

Bas Kooijman

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