Yuan hits 15-month high on firm fix, year-end demand

SHANGHAI: China’s yuan climbed to a fresh 15-month high against the US dollar on Wednesday, underpinned by the strongest official midpoint fixing in 15 months and seasonal year-end demand for the currency.

The onshore yuan rose to 7.0201 per dollar in early trade, the firmest level since September 30, 2024.

The currency has gained around 3.9% so far this year and looked set to book the biggest annual rise since 2020, supported by broad dollar weakness, easing trade tensions with the United States and resilient Chinese exports.

The dollar was headed for its worst annual performance in more than two decades as investors wagered the Federal Reserve would have room to cut rates further next year even as some of its peers looked set to hike.

“If the US dollar rebounds, the pace of yuan appreciation may slow down,” analysts at SWS Research said in a note, adding that the seasonal peak in foreign-exchange settlements could extend into January, ahead of the Lunar New Year, and continue to underpin the Chinese currency.

Exporters usually convert more of their foreign exchange receipts into the local currency towards year-end to meet various payments, including administrative requirements and for employees.

Prior to the market opening, the People’s Bank of China set the midpoint rate at 7.0471 per dollar, its strongest since September 30, 2024 but still 231 pips weaker than a Reuters’ estimate. The spot yuan is allowed to trade 2% either side of the fixed midpoint each day.

Despite the strong fix, the PBOC has been consistently setting it weaker than Reuters’ estimates since late November, which currency traders have interpreted as an attempt to rein in the yuan’s gains.

 The spot yuan opened at 7.0284 per dollar and was last trading at 7.0276 as of 0244 GMT, 4 pips firmer than the previous late session close.

The offshore yuan fetched 7.0184 yuan per dollar, up about 0.02% in Asian trade.

The dollar index, which measures the greenback against a basket of six currencies, was 0.093% lower at 97.80.