The offshore yuan rose to 6.6967 per dollar on Friday, its strongest level since July 2022, after China’s central bank extended its run of stronger daily currency fixings. The move comes before President Donald Trump and Chinese leader Xi Jinping are scheduled to meet next week in Washington.
The People’s Bank of China strengthened its daily reference rate for an eighth consecutive session. That is its longest such sequence since 2023. The firmer guidance indicates that the central bank is comfortable with further yuan appreciation before the meeting in the US.
The offshore market is pricing a stronger yuan even as rising bets on a Federal Reserve rate hike have lifted Treasury yields and the dollar. Those moves have widened the China-US yield gap to a record, a backdrop that would ordinarily weigh on the Chinese currency.
China’s export strength and robust conversion flows have instead supported the yuan’s rally. The currency is among Asia’s best-performing currencies this year and is on course for a seventh consecutive quarterly gain.
The central bank has nevertheless kept its daily reference rates weaker than prevailing market levels. That approach points to a preference for a measured rise in the yuan rather than a sharp increase.
Khoon Goh, head of Asia research at Australia & New Zealand Banking Group, said the fixing pattern showed that authorities intended to reduce the difference between the official fixing and the spot market rate. The sequence of stronger fixings has therefore narrowed the gap between the central bank’s guidance and market positioning without signalling a sudden change in the currency regime.
The currency guidance has come alongside an unchanged domestic lending-rate stance. The People’s Bank of China left its benchmark lending rates at record lows for a 16th consecutive month. The one-year loan prime rate was held at 3.0%, while the five-year LPR remained at 3.5%.
The stronger yuan and unchanged benchmark rates present two distinct elements of policy. The central bank has continued to guide the exchange rate higher while maintaining lending benchmarks at their existing levels. The duration of the stronger-fixing pattern, and whether it continues after the Washington meeting, remains unclear.
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