Yuan's Limited Upside Capped by Ongoing Trade Tensions

The Chinese yuan's appreciation against the US dollar is being capped by ongoing trade-related risks, according to OCBC Bank's FX strategists. The threat of new US tariffs and potential retaliation from Beijing keeps a lid on sustained appreciation.

OCBC analysts point to persistent trade tensions and tariff uncertainties as the primary factors preventing the yuan from gaining more ground against the greenback. While the yuan has shown resilience in recent sessions, the external demand outlook remains clouded by trade policy risks.

The bank's commentary reflects a broader market sentiment where traders remain cautious about adding long yuan positions amid unpredictable policy shifts. Even as China's economic data shows pockets of stability, the threat of new tariffs and potential retaliation keeps a lid on sustained appreciation.