(Yicai) Jan. 21 -- As the market anticipates the impact of tariffs imposed by Donald Trump after he was sworn in as US president, the Chinese yuan may stabilize or even turn to appreciate against the US dollar if the effect is weaker than expected, according to a market authority.

The US dollar index has been strengthening since last November due to Trump's plan to hike tariffs, showing that the market has made sufficient preparations, the expert told Yicai. However, the US government has to consider the impact on domestic inflation, so the level and pace of hiking tariffs are highly uncertain, and the possibility of them being lower than expected cannot be ruled out, the person added.

In addition, China's latest economic data has generally beaten market expectations, and the upward momentum of the dollar index has weakened after rising to a period high of 110, the expert noted, adding that these factors will help the redback stabilize.

With Trump officially entering the White House yesterday, the foreign exchange market has shown signs of shifting. The dollar index dived below 108 late on the same day, Beijing time, with an intraday drop of 1.3 percent, while the offshore yuan appreciated sharply against the dollar by nearly 600 basis points, with the exchange rate reaching around 7.28 from 7.34.

The market widely expects that the US tariffs will trigger the yuan's depreciation, said Sun Lu, senior Asia macro strategist at Goldman Sachs. However, if the initial tariffs imposed on China are only at a modest level of about 10 percent, China's central bank may only slightly adjust the yuan's central parity rate in the coming weeks or even one to two months, Sun added.

The central parity rate is a daily reference price set by the People's Bank of China for foreign exchange transactions, and the redback exchange rate should fluctuate within a range of 2 percent above or below the parity rate. The yuan's central parity rate against the US dollar was set at 7.1703 today, appreciating 183 bps from yesterday.

To stabilize the yuan, the PBOC issued a record CNY60 billion (USD8.2 billion) central bank bills in Hong Kong earlier this month to tighten offshore yuan liquidity. The bank also raised the macro-prudential adjustment parameter for cross-border financing to 1.75 from 1.5, increasing the cross-border financing quota for Chinese firms and financial institutions.

Editors: Dou Shicong, Martin Kadiev