China's yuan eases after Trump-Xi meeting, but exports underpin further strength

SHANGHAI, Sept 28 (Reuters) - China's yuan slipped against the dollar on Monday, dampened by signs of growing economic imbalances as attention shifts to fundamentals following President Xi Jinping's visit to Washington.

But analysts expect the yuan will continue to strengthen on the back of China's robust exports, although at a slower pace, as potentially higher US interest rates will increase the dollar's appeal.

"Following the meeting between Chinese and US leaders, trade and geopolitical factors have receded to the background, at least for now," Huatai Futures said in a report.

Underpinned by strong exports, "the yuan remains on an appreciation path, but with a slower upward slope."

The onshore yuan changed hands at 6.7142 against the dollar in late-morning trade, 0.03% weaker than the previous session's close.

The dollar index rose slightly to 101.09, flirting with a two-month high.

The United States and China have agreed to reduce tariffs on $30 billion of goods in each direction, and launch a dialogue on AI, after President Xi wrapped up a three-day visit to the U.S.

Fresh data on Monday showed China's industrial profit growth slowed further in August as economic imbalances deepen.

"With the US and China striking the tariff reduction agreement, Chinese exports will likely remain strong, helping to keep the yuan on a firm footing in the fourth quarter," COFCO Futures said in a report.

But the brokerage flagged the risks of a further widening in the US-China yield spread, and changes in external demand.

Huatai Futures also pointed out that the dollar is drawing support from inflation expectations and rising interest rates.

Although the yuan is increasingly insensitive to the dollar strength, "the climbing US Treasury yields will rein in the yuan's appreciation."

The People's Bank of China on Thursday vowed to stabilise market expectations, and called for "guarding against herd behavior in the market".

Prior to market open, the central bank set the yuan's midpoint at 6.7399 per dollar, the strongest since February 3, 2023.