Yuan Hits Strongest Level Since 2022 After PBOC Intervention

The offshore yuan reached 6.6967 per dollar on Friday. This is the highest level since July 2022. The currency gained 0.1% in the session. The move followed the People’s Bank of China setting a stronger daily fixing. The PBOC has now strengthened the fixing for eight consecutive sessions. This is the longest streak recorded since 2023. According to GN auto markets/forex: currency markets, the central bank is guiding the rate upward.

Central bank guides gradual appreciation

The PBOC keeps daily reference rates weaker than market levels. This signals a preference for slow movement. Authorities aim to narrow the gap between the fix and spot. Khoon Goh of ANZ says this indicates intent to close that distance. He notes further gains are likely if the trend continues. The central bank appears comfortable with a stronger currency. This approach precedes the upcoming meeting between US and Chinese leaders.

Export strength drives currency rally

China’s exports have surged in recent months. Robust conversion flows support the yuan’s rise. The currency is on track for a seventh straight quarterly gain. It ranks among Asia’s best-performing currencies this year. This performance occurs despite rising US Treasury yields. Bets on a Federal Reserve rate hike have pushed the dollar higher. The China-US yield gap has widened to a record level.

Yield gap widens to record

The divergence between Chinese and American interest rates has expanded. Higher US yields attract capital to the dollar. The yuan has remained resilient against this pressure. Market participants watch the PBOC’s next fixing closely. The central bank balances external stability with internal growth. The current trajectory suggests continued support for the local currency. Traders monitor the spot-fix spread for further cues.