The renminbi rallied on Tuesday after news emerged that the US is considering dropping some of the tariffs imposed on China in an effort to pause the trade war between the two countries.
The Financial Times revealed that the White House is considering removing $112bn worth of levies on Chinese goods, such as clothing, appliances and flat screen monitors, all of which were introduced on 1 September at 15%.
The news comes as the two nations have agreed terms of a ceasefire, which is expected to be signed by US President Donald Trump and his Chinese counterpart Xi Jinping in the next few weeks.
As a result, China's currency strengthened past the RMB7 per dollar mark, which is considered an important threshold. The currency fell below this level three months ago for the first time since the financial crisis as a result of the pressure placed on China by the trade war with the US.
Despite the good news, US equities were mixed on Tuesday, with the Dow Jones hitting a fresh all-time high but the S&P 500 falling by 0.6%. European and Asian stocks were on the rise, with China's CSI 300 (made up of Shanghai- and Shenzhen-listed stocks) rising by 0.6%.
In exchange for dropping the tariffs, FT's sources said Washington would expect to see a gesture of good will, such as better provisions on the protection of intellectual property for US firms, a binding agreement on the amount of purchases of US farm products and a ceremony to seal the deal on US soil.
The US has already suspended a planned increase in tariffs on Chinese goods worth $250bn from 25% to 30%, which was due to go into force on 15 October.