The U.S. dollar and Chinese yuan held steady on Wednesday following trade negotiations in London. Both nations hinted at progress, though the absence of clear details kept currency markets apprehensive.

Framework Agreement Reached but Market Optimism Muted

Authorities from both countries agreed on a framework to address China’s rare earth export restrictions and to facilitate select adjustments on U.S. tech export curbs. However, further actions rely on endorsement from President Biden and President Xi, limiting immediate market impacts.

Chinese Vice Commerce Minister Li Chenggang underscored that the framework needs approval from the heads of state.

Dollar Performance Against Expectations

According to James Kniveton of Convera, conventional metrics would typically suggest a moment to sell the dollar. Improved trade relations and a global appetite for risk typically reduce dollar strength. However, trends for 2025 indicate a deviation from this norm.

Investors might continue to favor dollars while moving into U.S. equities, as the dollar shifts from its traditional safe-haven status.

Current Forex Market Dynamics

• Euro: Slight decline of 0.08% to $1.1416

• Yen: Dollar steady at 145.05

• Onshore Yuan: Unchanged at 7.1867

• Offshore Yuan: Slight drop to 7.1875, nearing two-week lows

Insights on Currency Dynamics

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