Chinese Yuan Gains on US Dollar as Softer US Inflation Data Sparks Optimism

The Chinese Yuan continued its upward trajectory against the US Dollar on Tuesday, May 13, 2025, capitalizing on the Dollar’s broad weakness following the release of softer-than-expected US inflation figures for April. USD/CNY dipped to 7.2057 from the previous day’s close of 7.2018, with the pair hitting a daily high of 7.2057 and a low of 7.1869. The Yuan’s strength reflects a broader market shift, as disappointing US Consumer Price Index (CPI) data fueled expectations of a potential Federal Reserve rate cut, boosting risk appetite and pressuring the Dollar across major currency pairs.

US inflation data revealed a modest 0.2% month-over-month rise in April, up from a 0.1% decline in March but below market forecasts of 0.3%, marking the smallest annual increase since February 2021 at 2.3% year-over-year, down from 2.4%. This underperformance, mirrored by a steady core CPI at 2.8%, has alleviated some pressure on the Fed, with markets now anticipating a more dovish stance, as evidenced by the US Dollar Index (DXY) sliding to 101.29 from a daily range between 100.76 and 101.28. The Dollar’s retreat has provided a tailwind for the Yuan, which has been gaining ground since the start of the trading session.

The Yuan’s advance is further supported by improved global market sentiment, partly driven by the recent US-China 90-day tariff suspension, which reduced duties to 30% on Chinese imports and 10% on US goods, easing trade tensions and fostering optimism for economic stability. This environment has diminished the Dollar’s safe-haven appeal, allowing the Yuan to capitalize on the shift toward riskier assets. The pair’s movement underscores the Yuan’s sensitivity to US economic indicators, particularly as China’s export-driven economy stands to benefit from a weaker Dollar and improved trade conditions.

Looking ahead, the USD/CNY pair’s trajectory may hinge on further US economic releases, such as upcoming business optimism and inventory data, which could influence the Dollar’s direction. For now, the Yuan’s rise highlights its growing resilience amid a softer US inflationary backdrop, with market participants closely monitoring the Fed’s next moves. If the current risk-on mood persists, the Yuan could maintain its upward momentum, potentially testing lower levels against the Dollar in the near term.