Yuan rises to 3-year high on Middle East peace hopes, firm PBOC fix

SHANGHAI: China’s yuan rose to its strongest level against the US dollar in more than 3 years on Thursday, supported by prospects of a Middle East peace deal and a robust official fixing from the People’s Bank of China (PBOC).

Iran said on Wednesday it was reviewing a US peace proposal that sources said would formally end the war but leave unresolved key US demands that Iran suspend its nuclear program and reopen the Strait of Hormuz.

The onshore yuan firmed slightly to 6.8033 per dollar in early trade, its strongest since Feb. 14, 2023, while the offshore yuan also touched 6.8033, the highest since Feb. 10, 2023.

“The USD had softened quite considerably on news that the US and Iran were on a fresh proposal to end the war on Wednesday, in line with our suspicions that Trump may want to wrap up his conflict in Iran before the Trump-Xi summit or risk another delay,” analysts at Maybank said in a note.

US President Donald Trump and Chinese President Xi Jinping are scheduled to meet next week in Beijing.

Further de-escalation in the Middle East, such as Iran accepting the US-proposed deal and a gradual reopening of the Strait of Hormuz, could continue to support gains in Asian currencies, MUFG analysts said in a note.

“We maintain a constructive view on CNY, MYR and SGD, where both fundamentals and technicals point to further upside against the dollar.”

 The spot yuan opened at 6.8090 per dollar and was last trading at 6.8064 as of 0214 GMT, 69 pips firmer than the previous late session close.

Prior to the market opening, the People’s Bank of China set the midpoint rate at 6.8487 per dollar, its strongest since March 24, 2023, though 400 pips weaker than a Reuters’ estimate. Spot yuan is allowed to trade 2% either side of the fixed midpoint each day.

The offshore yuan traded at 6.8053 yuan per dollar, up about 0.13% in Asian trade.

Overnight data showed US private-sector employment rose more than expected in April. Markets are now turning to the nonfarm payrolls report due later this week, a key test of whether the economy remains resilient enough to keep Federal Reserve policy on hold or if signs of labor-market cooling will revive calls for rate cuts.

The dollar index, which measures the greenback against a basket of six currencies, was 0.082% lower at 97.97.