Story
Chinese Yuan Hits Over 4-Year High as PBOC Lifts Fixing, Expands Currency Clearing
Summary
The yuan strengthened to its highest level since July 2022, supported by a series of stronger central bank fixings and a move to expand direct clearing for more currencies, ahead of a key U.S.-China presidential meeting.
The Chinese yuan climbed to its strongest level in more than four years against the U.S. dollar on Friday, buoyed by persistent support from China's central bank and a move to broaden the currency's international infrastructure. The appreciation comes ahead of a planned meeting between Chinese President Xi Jinping and U.S. President Donald Trump on September 24, where trade relations are expected to be a central topic.
Consecutive Stronger Fixings Drive Gains
The People’s Bank of China (PBOC) set a firmer daily trading reference rate for the yuan for an eighth consecutive session, its longest such streak since 2023, according to Investing.com. In response, the offshore yuan rose as much as 0.1% to approximately 6.7 per dollar, a level not seen since July 2022.
The currency's performance has made it Asia's strongest this year, and it is on track for a seventh straight quarterly advance. This strength is underpinned by robust Chinese exports and consistent demand from corporations converting foreign currency earnings back into yuan.
China Broadens International Clearing
Supporting the yuan's internationalization, China is expanding the infrastructure for direct currency settlement. On September 14, the Shanghai Clearing House began offering central-counterparty clearing services for spot transactions involving several additional currencies:
Ad- Singapore dollar
- New Zealand dollar
- Thai baht
The initial session saw 12 banks participate, clearing transactions worth 996 million yuan. This move, which adds to existing clearing for the U.S. dollar, euro, pound, and others, is designed to encourage greater use of the yuan in cross-border trade and finance.
Resilience Amid Domestic Headwinds
The yuan's advance is notable as it has occurred alongside a strengthening U.S. dollar, with the dollar index reaching a near five-week high this week following the Federal Reserve's latest policy decision. The currency has also held firm despite signs of weak domestic credit demand in China.
Data for August showed Chinese banks extended just 60 billion yuan in new loans, significantly below economists' forecasts of 400 billion yuan. The outstanding yuan loan balance grew at a record-low 4.9% year-on-year, highlighting a potential disconnect between the currency's external strength and internal economic pressures.
Read next
More on Forex
Canadian Dollar Weakens as Surging Oil Prices Boost U.S. Rate Hike Bets
The Canadian dollar fell against the U.S. dollar, as the inflationary impact of soaring oil prices pushed U.S. Treasury yields higher, overshadowing the traditional benefits of high energy costs for the loonie.
European Bond Yields Rise as Traders Price ECB Hikes Into 2027
German short-term bond yields have surged to new highs as money markets price in a prolonged European Central Bank rate-hiking cycle, fueled by persistent energy-driven inflation fears.
Dollar Reaches Two-Week High as Markets Brace for Federal Reserve Rate Decision
The U.S. dollar climbed to its highest point in two weeks on Tuesday, bolstered by rising Treasury yields as traders priced in a high probability of a Federal Reserve interest rate increase.
British Pound Falters as Weak UK Jobs Data Coincides With Dollar Rally
The British pound declined against a broadly stronger U.S. dollar on Tuesday after a disappointing UK jobs report fueled expectations the Bank of England will hold interest rates. The move comes as currency markets brace for a key policy decision from the U.S. Federal Reserve.