China Eases Grip on Yuan With Fixing Past 7.2 to the Dollar

China loosened its grip on the yuan by weakening its daily reference rate past a key threshold, with regulators moving to support the country's tumbling stock markets amid an escalating trade war with the U.S.

The People's Bank of China set the so-called fixing at 7.2038 against the dollar on Tuesday, the first time since September 2023 that the reference rate breached 7.20. The closely watched threshold is viewed as a gauge of Beijing's attitude toward currency support.

The move, along with Beijing's threat of retaliation against U.S. President Trump's latest tariff salvo, triggered a depreciation in the yuan in morning trading, sending the Chinese currency to its lowest level in months.

The yuan has been under heightened pressure since Trump's re-election last winter, fueling speculation that Beijing might weaken the currency to boost exports as the trade conflict with the U.S. intensifies.

However, economists say Beijing will be reluctant to depreciate its currency significantly this time, as such a move would attract further ire from the American president and might drive more capital out of China and further destabilize the country's financial system.

The yuan weakened against the dollar in the onshore market Tuesday morning as traders weighed the PBOC's fixing and China's threat of more countermeasures against U.S. tariffs. The yuan was last changing hands at 7.3280 to the dollar.

As part of efforts to stabilize Chinese financial markets hammered by the tariff news, the PBOC on Tuesday pledged to lend support to Central Huijin Investment, a unit of state-owned sovereign-wealth fund China Investment Corp., to increase its holdings of stock market index funds.

Meanwhile, the National Financial Regulatory Administration, China's top financial watchdog, said Tuesday that it will allow the country's insurance companies to invest more in stock markets.

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