China’s yuan briefly hits 1-week high as market eyes key meetings

SHANGHAI: China’s yuan briefly hit a one-week high against the dollar before giving up all its intraday gains on Monday, as recent greenback strength in global markets outweighed a firmer-than-expected central bank guidance fix.

Market participants carefully assessed the likelihood of a US Federal Reserve interest rate reduction next month and intervention risks around the Japanese yen that could affect the dollar’s movements and other major currencies, currency traders said.

The onshore yuan rose to a high of 7.1042 per dollar, the strongest since November 17, before last changing hands at 7.1078 as of 0349 GMT.

Its offshore counterpart traded at 7.1089 per dollar, down about 0.06% in Asian trade.

The slight strength in the spot rate in early trades came after the central bank lifted its official guidance to a one-week high to stabilise market expectations, traders said.

Prior to the market opening, the People’s Bank of China (PBOC) set the midpoint rate at 7.0847 per dollar, its highest since November 17 and 315 pips firmer than a Reuters’ estimate of 7.1162. The spot yuan is allowed to trade a maximum of 2% either side of the fixed midpoint each day.

Meanwhile, market attention remained focused on Beijing and Tokyo’s deepening diplomatic dispute over Japanese Prime

 Minister Sanae Takaichi’s comments on Taiwan - the worst crisis between the two countries in years. The yuan-yen cross rate traded not far from a 16-month high hit last week. It last fetched 22.0229.

 Sentiment was also dampened by declines in Chinese equities, with the benchmark Shanghai Composite index touching a six-week intraday low.

“While a strong AI investment cycle in China echoes the US, a big difference is that China’s growth trajectory continues to be held back by ongoing property market weakness,” Barclays analysts said in a note.

Apart from the global market impact, traders and analysts said they would monitor the upcoming Politburo meeting and the Central Economic Work Conference (CEWC) in December for possible hints on the policy agenda for next year.

“We expect Beijing to maintain its growth target at ‘around 5%’ for 2026 … emphasising flexibility through the word ‘around’,” said Serena Zhou, senior China economist at Mizuho Securities.

“Meanwhile, we forecast GDP growth to ease to 4.6% in 2026 from 4.8% in 2025, in view of mounting structural headwinds stemming from deleveraging by local governments and households.”

Zhou added that possible measures to stabilise the property market, if implemented, would probably be unveiled after the CEWC.