China’s yuan weakened against the U.S. dollar on Wednesday, hovering near a 4-month low, as industrial profits extended declines in October and investors assessed potential impacts of new U.S. tariffs. Official data showed October profits fell 10% year-on-year, following a 27.1% slump in September, highlighting ongoing demand weakness in China’s $19 trillion economy.
The spot yuan opened at 7.2460 per dollar and last traded at 7.2561, 58 pips lower than the previous close, and 0.8% weaker than the midpoint. Meanwhile, the U.S. Dollar Index (DXY) steadied after a spike driven by President-elect Donald Trump’s tariff threats on Mexico, Canada, and China.
Trump announced plans for “an additional 10% tariff, above any existing tariffs,” on Chinese imports unless Beijing acts against fentanyl trafficking. His comments have reignited fears of a renewed trade war, reminiscent of his first term, which disrupted global supply chains and fueled inflation. Economists warn further tariffs could deepen economic strain, with Americans facing rising costs of living and growth forecasts for China’s economy in 2025-2026 being downgraded.
China’s state media cautioned that escalating tariff threats could lead to a “mutually destructive tariff war,” leaving no winners. President Xi Jinping, in a meeting with former Singapore Prime Minister Lee Hsien Loong, assured that China’s economy would sustain long-term growth despite external pressures. However, the 10% profit decline for Chinese firms in October underscores the economy’s current vulnerabilities to trade shocks, intensifying concerns for the yuan amid heightened tariff risks.
Technical Outlook – U.S. Dollar / Chinese Yuan
On the daily chart, the pair is approaching a significant resistance level at 7.2850, which aligns with the upper trendline of a near-term consolidation pattern. A decisive break above 7.2850 could trigger further upside momentum, targeting resistance levels at 7.3085 and 7.3155 in the near term.
On the downside, sustained trading below 7.2300 could shift the bias to bearish, with the next support levels seen at 7.2050 and 7.1850.
Until then, Happy Trading!
Commodity Samachar Securities
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