USD/CNY rises as China controls rare earths, US-China tensions escalate

USD/CNY strengthened 0.15% to 7.1285 as markets digest China's new export controls on rare earth materials and escalating trade tensions between Washington and Beijing. China's Ministry of Commerce defended its rare earth export restrictions as lawful and transparent, while accusing the US of repeatedly tightening restrictions on Chinese exports without proper notification. The measures could impact global supply chains for critical minerals used in technology and defense sectors, potentially affecting trade balances and currency flows. Beijing claims it notified Washington through bilateral channels, contrasting with what it sees as unilateral US actions. The development adds pressure on the yuan as investors assess potential retaliation risks and broader implications for US-China trade relations. Technical indicators show USD/CNY testing resistance at 7.1350, with support established at 7.1150. Further escalation in trade rhetoric could push the pair toward 7.1500, while any diplomatic breakthrough might ease pressure on the yuan.