China’s Yuan weakened against the Dollar on Friday and fell to its lowest level in nearly two years against major trading partners.

This came as US President Donald Trump and Chinese President Xi Jinping held a highly anticipated phone call that failed to resolve key issues fuelling tensions between the world’s two largest economies.

According to a Chinese government summary, during the call lasting over an hour, Xi urged Trump to retract trade policies that have unsettled the global economy and cautioned him against taking threatening actions regarding Taiwan, Reuters reports.

“Although the likelihood of a US-China deal increases with more high-level dialogues, investors remain sceptical that both sides are merely buying time to address some pressing issues,” stated Gary Ng, senior economist at Natixis.

Trump took to social media to describe the talks as focusing mainly on trade and resulting in “a very positive conclusion.” He also announced plans for additional lower-level US-China discussions and stated that "there should no longer be any questions regarding the complexity of Rare Earth products."

“The call does not offer much comfort in cutting tariffs, but only touching on access of critical materials and tech export control. Therefore, there is no certainty of what kind of deal will be made, and it may only be a partial one given the wide range of issues between the US and China,” Ng added.

At the time of writing, the onshore Yuan closed its domestic trading session at 7.1847 per Dollar, slipping 0.08% from the previous evening. Meanwhile, the offshore Yuan was trading at 7.1852.

Trade negotiations between Washington and Beijing had stalled following last month’s Geneva meeting, where both parties agreed to temporarily roll back most tariffs imposed since April. However, Trump accused China of breaching the bilateral agreement.

Before markets opened, the People’s Bank of China (PBOC) set the Yuan’s midpoint rate at 7.1845 per Dollar, its strongest level since 26^th May and 90 pips stronger than Reuters’ estimated 7.1935. The spot Yuan is permitted to fluctuate within 2% above or below this daily midpoint.

Based on Friday’s official reference rate, the CFETS Yuan index, a measure of the Yuan’s weighted value against 25 trading partner currencies, dropped to 95.58. According to Reuters calculations using official data, the index has declined 5.8% so far this year.

Despite this, the spot Yuan has gained 1.6% against the Dollar during the same timeframe.