The yuan is edging toward the closely watched 7-per-dollar level, lifted by improving US–China relations and a softer dollar, though the speed of its rise suggests Beijing is carefully managing the appreciation.
Info via a (gated) Bloomberg report. In brief.
China’s onshore yuan strengthened to around 7.06 on Wednesday, its firmest level in more than a year, after the PBOC set its daily fixing at the strongest since October 2024.
Even so, authorities are signalling they want the rally to remain controlled:
- PBOC has recently been publishing fixings that are weaker than market models imply, while state-owned banks have intermittently bought dollars to slow the yuan’s advance, traders said;
- Officials appear wary of the yuan breaking too quickly into the 7.0–7.1 zone, which could trigger large dollar selling by corporates and risk destabilising flows.
- Citigroup strategists note policymakers are comfortable with a stronger yuan but still prefer a “managed appreciation.”
- Offshore traders and hedge funds have been positioning for additional gains, selling dollars against the yuan in both spot and options markets. Still, analysts at OCBC and others caution that the PBOC will continue to prioritise stability, favouring a gradual and policy-guided strengthening path.
