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Chinese Yuan Hits 3.5-Year High on Stronger PBoC Fixing
Summary
The yuan strengthened against the U.S. dollar after the People's Bank of China set its daily reference rate at the strongest level since February 2023, signaling a tolerance for gradual appreciation.
The Chinese yuan traded near a 3.5-year high against the U.S. dollar on Tuesday, supported by a stronger-than-expected official reference rate from the country's central bank as markets look ahead to a high-level U.S.-China summit.
PBoC Guides Yuan Higher
The People's Bank of China (PBoC) set the yuan's daily midpoint rate at 6.7459 per dollar, its strongest level since February 2023. The fixing was 28 basis points firmer than Monday's rate, according to official data.
This stronger guidance helped bolster the currency in both domestic and international markets. The onshore yuan (USD/CNY) had touched 6.6947 on Monday, its strongest point since January 2023, while the offshore yuan (USD/CNH) reached a low of 6.6908.
AdPolicy Shift Signals Tolerance
The recent strength in the yuan follows a pattern where the PBoC has accelerated the pace of appreciation in its daily fixings. This move is seen by market participants as an effort to close the gap between the official rate and market expectations.
This policy adjustment may indicate that Chinese authorities are more comfortable with a gradual strengthening of the currency. The move comes just ahead of a scheduled meeting between China's top leader and U.S. President Donald Trump from September 23-25, where topics are expected to include trade, technology, and supply chains.
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