China’s yuan fixing rate hits 2-month high as US dollar drops

China’s central bank set the yuan’s daily fixing against the US dollar at its strongest level in more than two months, as the greenback tumbled to a multi-year low amid expectations for more interest rate cuts from the Federal Reserve later this year.

On Friday, the People’s Bank of China set the yuan’s midpoint rate – also known as the daily fixing rate – at 7.1772 per US dollar, its strongest showing since late March.

The move came as the US dollar index plummeted to 97.61 on Thursday – a three-year low – after the May producer price index came in below market expectations, prompting traders to price in more interest rate cuts by the Federal Reserve.

Confidence in the currency has also wavered after US President Donald Trump announced plans to set unilateral tariff rates for America’s trading partners, saying countries could “take it or leave it”.

Amid concerns over US tariff policy and the sustainability of its debt levels, the country’s currency has been under pressure for months, lending relative strength to the yuan.

While an agreement “in principle” between China and the US after two days of trade talks in London this week appeared to signal a truce, some analysts remained cautious.