FX.co ★ Offshore Yuan Slips After PBoC Rate Cut

The offshore yuan weakened to approximately 7.22 per dollar on Tuesday, marking its third consecutive session of declines. This shift emerged as investors absorbed the latest monetary policy decision from the People’s Bank of China. In their May adjustment, the PBoC reduced the one-year loan prime rate (LPR) by 10 basis points to 3.0%, alongside a similar reduction in the five-year LPR, which is crucial for mortgage rate decisions, bringing it down to 3.5%. These adjustments, which were widely anticipated by the market, set both rates to unprecedented lows and were part of a broader monetary easing strategy introduced earlier this month. These rate reductions highlight Beijing’s heightened efforts to rejuvenate a sluggish economy amidst growing trade tensions, which pose risks to economic growth. Further exacerbating the situation, China has accused the United States of undermining the preliminary trade agreement achieved during the Geneva tariff discussions. This followed Washington’s warning against the use of Chinese semiconductors—a move that China labeled as “discriminatory” and “market-distorting,” intensifying fears of renewed tensions between the US and China.