China’s yuan slips as state media warns against one-way bets

SHANGHAI: China’s yuan slipped against the dollar for a second straight session on Monday, moving further away from the psychologically important 7-per-dollar mark, as authorities continued to push back against rapid, one-way gains in the currency.

The central bank continued to set a weaker-than-expected midpoint to rein in excess yuan strength, while state-run media editorials also cautioned against betting on one-sided moves in the yuan after the offshore yuan briefly rose past the key 7 level last week.

“For market participants, such as companies and financial institutions, exchange rate movements are inherently unpredictable,” the Securities Times said in its front-page editorial on Monday.

Markets should “avoid blindly following trends or speculating on exchange rate fluctuations,” the official newspaper added.

On the same day, the Shanghai Securities News also warned against betting on unilateral yuan appreciation and highlighted uncertainties around the currency’s future trajectory, citing industry experts.

Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate at 7.0331 per dollar, its strongest since September 2024 but 274 pips weaker than a Reuters’ estimate of 7.0057.

The spot yuan is allowed to trade a maximum of 2% either side of the fixed midpoint each day.

The central bank has been setting softer-than-expected guidance since late November, in what investors interpreted as an official attempt to slow the yuan’s recent rally, which was partly fueled by rising seasonal demand and a broadly weaker dollar.

“The broad trend of yuan appreciation remains intact, with a breach of the 7 mark being highly probable,” said Zhou Junzhi, chief macro analyst at China Securities.

“However, the appreciation pressure stemming from foreign exchange settlements will ease once the settlement window period concludes.” Exporters usually convert more foreign exchange receipts into the local currency to meet various payments, including administrative requirements and for employees, toward the year-end and before the Lunar New Year holidays.

The Lunar New Year, the biggest holiday in China, falls in mid-February in 2026.

The onshore yuan changed hands at 7.0105 per dollar as of 0333 GMT, after hitting a 15-month high of 7.0053 last week.

The Chinese currency has gained more than 4.1% against the dollar so far this year and looked set to book the biggest annual rise since 2020.

Its offshore counterpart last fetched 7.0086 per dollar as of 0333 GMT. Global investment houses widely expect the yuan’s upward momentum to extend into the new year and test the key 7 mark.

The central bank reaffirmed its commitment to maintaining currency stability in its annual financial stability report released late Friday, while emphasising that it will guard against the risks of exchange rate overshooting.