China’s yuan slipped against the dollar, which drew strong corporate demand during Tuesday’s session and offset improved sentiment on reports the leaders of the world’s two largest economies were planning to meet.
Aides to U.S. President Donald Trump and Chinese leader Xi Jinping have discussed a potential meeting between the leaders during a trip by the U.S. president to Asia later this year, sources told Reuters.
U.S. Treasury Secretary Scott Bessent said on Monday that there would be “talks (with China) in the very near future,” as a host of countries sought to secure trade deals with Washington ahead of an August 1 deadline.
The 90-day tariff truce agreed by Washington and Beijing during trade talks in Switzerland is due to end on August 12.
The possible meeting between the two top leaders “certainly lifted sentiment,” said a trader at a foreign bank.
“Market is closely monitoring any further developments around the Sino-U.S. relations.”
Currency traders said the initial yuan strength was quickly offset by rising corporate interests in buying the dollar.
As of 0344 GMT, the onshore yuan 
USDCNY was 0.02% lower at 7.1721 per dollar, while its offshore counterpart USDCNH was down about 0.01% at 7.1721.
Prior to market opening, the People’s Bank of China (PBOC) set the midpoint rate USDCNY at 7.1460 per dollar, its strongest since November 8 and 175 pips firmer than a Reuters’ estimate USDCNH of 7.1635. The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.
“While the messaging from the PBOC appears to be to maintain a firmer stance on yuan versus the dollar … a heavy July dividend payments schedule, and firm southbound flows have kept the yuan on the back foot,” said Barclays analysts in a note.
“Meanwhile, reluctance of exporters to convert to yuan and reduced offshore long yuan positioning imply headwinds for the currency.”
Separately, a lot of market attention will shift to the Politburo meeting later this month, which is likely to shape economic policy for the rest of the year.
LEVELS AT 0344 GMT:
