China’s yuan jumps to one-month high on Powell’s dovish pivot

SHANGHAI: China’s yuan jumped to the strongest level in a month against the dollar on Monday, lifted by a dovish policy pivot by the US Federal Reserve Chair Jerome Powell.

The boost to the Chinese currency and the improvement in investor sentiment coincided with a remarkable rally in Chinese equity markets, with the Shanghai stock benchmark surging to its highest levels in a decade.

“The trade détente with the US looks to be extending, exporters appear to be converting more of their dollar earnings into local currency, and government policies encouraging ‘anti-involution’ are supporting sentiment and performance,” analysts at Goldman Sachs said in a note.

The yuan rose in both onshore and offshore markets in morning deals. The onshore yuan strengthened to a high of 7.1569 per dollar, the strongest level since July 24. It last traded at 7.1587 as of 0341 GMT.

Its offshore counterpart jumped to a one-month high of 7.1574 per dollar before last fetching 7.1591.

“We can expect Asian FX to start this new week on a strong note as the dollar retreats in line with lower US Treasuries yield,” analysts at UOB said in a note.

The dollar and US Treasury yields were under pressure after Powell on Friday signalled a possible interest rate cut at the US central bank’s meeting next month, saying that risks to the job market were rising but also noting inflation remained a threat and that a decision wasn’t set in stone.

Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate at 7.1161 per dollar, its strongest level since November 6, 2024 and 390 pips firmer than a Reuters’ estimate of 7.1551.

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

Separately, investors will monitor trade and tariff negotiations between the United States and South Korea and India for possible impact on financial markets, traders and analysts said, along with the Fed’s preferred inflation gauge, the PCE deflator on Friday.