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Chinese Yuan Hits Over 4-Year High on Stronger PBOC Guidance and Expanded Clearing
Summary
The offshore yuan strengthened to its highest level since July 2022, supported by a series of stronger central bank fixings and an expansion of China's currency clearing capabilities ahead of a key US-China summit.
The Chinese yuan climbed to its strongest level in more than four years on Friday, buoyed by persistent central bank support and a strategic expansion of the country's currency clearing infrastructure. The move comes as markets anticipate a planned meeting between Chinese President Xi Jinping and U.S. President Donald Trump scheduled for next week.
Yuan's Guided Ascent
The offshore yuan (CNH) rose as much as 0.1% to approximately 6.7 per dollar, a level not seen since July 2022. The currency's strength was underpinned by the People’s Bank of China (PBOC), which set a firmer daily trading reference rate for the eighth consecutive session, its longest such streak since 2023.
According to Investing.com, the yuan is now on track for its seventh straight quarterly gain, establishing it as Asia’s best-performing currency this year. The performance has been driven by robust Chinese exports and increased demand from companies converting foreign-currency earnings into yuan.
Expanding International Infrastructure
AdChina is also taking steps to promote the yuan's international use by broadening the infrastructure for direct currency settlement. On September 14, the Shanghai Clearing House introduced central-counterparty services for spot transactions involving the Singapore dollar, New Zealand dollar, and Thai baht.
The initiative, which saw 996 million yuan in transactions cleared on its first day, expands the number of currencies with access to China's onshore clearing network. Shanghai Clearing House already provides these services for transactions with the U.S. dollar, euro, British pound, Australian dollar, and Japanese yen.
Resilience Amid Market Headwinds
The yuan's appreciation is notable as it has occurred alongside a strengthening U.S. dollar, which reached a near five-week high this week following the Federal Reserve's latest policy decision. The currency's resilience also contrasts with signs of weak domestic credit demand in China, where banks extended only 60 billion yuan in new loans in August, significantly below economists' forecasts.
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