Yuan near 14-month high as PBOC sets strongest fix in over a year

SHANGHAI: China’s yuan rose to its highest point in nearly 14 months on Tuesday after the central bank set the daily fix at the strongest level in more than a year, while more investment banks raised their currency forecasts.

In early trading, the onshore yuan rose to 7.0644 per dollar, the strongest level since October 11, 2024.

The offshore yuan firmed to 7.0618, the strongest level since October 9, 2024.

 Before the market opened, the People’s Bank of China set the midpoint rate at 7.0754 per dollar, its strongest since October 14, 2024, which was 90 pips weaker than a Reuters estimate. The spot yuan is allowed to trade 2% on either side of the fixed midpoint each day.

The spot yuan opened at 7.0688 per dollar and was last trading at 7.0652 at 0248 GMT, 73 pips firmer than the previous late-session close.

A private survey on Wednesday showed China’s services activity expanded in November at the slowest pace in five months, as growth in new orders softened despite stronger foreign demand.

Some investment houses expect the Chinese yuan to strengthen next year beyond the psychologically critical 7-yuan-per-dollar mark for the first time since 2023.

  Analysts at BofA Securities expect the onshore yuan will rise to 6.80 per dollar by the end of 2026, underpinned by a large current account surplus and a narrowing interest rate gap with the US

  They said a steadier yuan is supportive of Beijing’s push to internationalise its currency for cross-border settlement, payments and funding, reducing reliance on the US dollar. Based on that outlook, they ended a recommendation to be short on the offshore yuan versus the CFETS trade-weighted basket.

The yuan also found support as the dollar slipped to a two-week low.

 Looking ahead, some investors were

 Becoming bearish

 on the US dollar due to expected rate cuts from the US Federal Reserve and the prospect of White House economic adviser Kevin Hassett being nominated to chair the central bank.

The dollar index, which measures the greenback against six major currencies, was 0.073% lower at 99.23.

Markets are watching US data releases due this week, including Wednesday’s November ADP employment report and Friday’s reading of the Fed’s preferred inflation gauge.

Investors are also awaiting signals on next year’s growth targets from China’s annual Central Economic Work Conference and a December Politburo meeting.