Offshore Yuan Gains on Dollar Weakness

The offshore yuan edged higher to around 7.13 per dollar on Friday, supported by a weakening greenback ahead of the August jobs report, which is expected to solidify expectations for a Fed rate cut later this month. The latest ADP data showed US labor market softening, prompting markets to fully price in a 25 bps cut in September. Meanwhile, in China, investors are closely watching next week’s trade and inflation data for further insight into the country’s economic outlook. On the monetary policy front, the central bank will conduct a CNY 1 trillion outright reverse repo operation on September 5, 2025, to maintain sufficient liquidity in the banking system. The yuan’s gains were tempered by external headwinds after Mexico revealed it is considering imposing tariffs on imports from countries lacking trade agreements—most notably China—under the "Plan Mexico." Despite Friday’s modest uptick, the yuan is set for a weekly loss, snapping a two-week streak of strong gains.