Yuan holds near January 2023 high despite broad dollar strength

what happened

According to Newsmetry API, China’s yuan stayed close to its strongest level in three years and nine months on Tuesday, showing little reaction to a stronger dollar. The onshore currency was largely unchanged at 6.6972 per dollar, near its best level since January 16, 2023. The offshore yuan slipped about 0.05% to 6.6984 per dollar during Asian trading.

The dollar index hovered near an 18-month high. Renewed attacks on energy infrastructure in the Middle East and Ukraine revived concerns about supply, while elevated US Treasury yields also supported the dollar. Huatai Securities said dollar strength was slowing the yuan’s appreciation rather than producing a sustained decline. Corporate foreign-exchange settlement and a stable midpoint fixing continued to provide a buffer.

Before trading began, the People’s Bank of China set the midpoint at 6.7298 per dollar, its strongest fixing since February 2, 2023, and roughly 317 pips weaker than a Reuters estimate. For nearly a year, the central bank has set guidance below market expectations, which traders and analysts view as an effort to restrain the yuan’s appreciation. Spot trading is permitted within 2% of the midpoint on either side. China Securities expects modest yuan gains through year-end, with USD/CNY around 6.6–6.7, but sees a rapid one-way rally as unlikely.

why it matters

The yuan’s resilience matters for currency markets because the PBOC’s daily fixing limits the pace of appreciation. Federal Reserve rate expectations, China’s trade surplus and corporate FX demand remain key factors for USD/CNY.

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