Yuan hovers near 32-month high as China’s central bank signals to slow rally

HONG KONG: China’s yuan hovered near a 32-month high against the US dollar on Tuesday as equity market optimism continued to buoy the currency while the central bank signalled renewed efforts to slow its rise.

The onshore yuan rose to a high of 6.9809 per dollar, hovering near the 6.9802 seen on Monday, which was the strongest since May 17, 2023, before easing to 6.9810 as of 0420 GMT.

The offshore yuan traded at 6.9764 yuan per dollar, up about 0.1% in Asian trade. The yuan gained 4.5% against the greenback last year, the biggest annual rise since 2020 and ending three straight years of declines.

Prior to the market opening, the People’s Bank of China set the midpoint rate at 7.0173 per dollar, the strongest since September 30, 2024.

However the fixing came in 443 pips weaker than a Reuters estimate, the biggest gap since the estimates began in 2022.

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

The central bank has been gradually strengthening its daily yuan official guidance, but at a level weaker than market projections since late November, suggesting the PBOC aims to keep the currency stable and fend off risks, analysts said.

The consistently weaker-than-expected fixing “signals the central bank’s clear intention to stabilise the exchange rate market,” analysts at Nanhua Futures said in a note.

Meanwhile, the bullish sentiment seen in the equity market, which pushed the benchmark Shanghai Composite Index to a fresh decade-high on Tuesday, is also lending support to the Chinese currency.

“As the stock market rises and the yuan continues to appreciate, it could form positive feedback, both amplifying stock market momentum and magnifying the exchange rate gains,” analysts at Orient Securities said in a note.

The dollar’s six-currency index steadied near a two-week high, as market jitters from US military action in Venezuela eased and comments from Fed officials spurred risk-taking on Wall Street. Expectations of policy easing this year edged up after dovish comments from a Fed official who sees a risk that the jobless rate could ‘pop’ higher.

The official trade-weighted CFETS index rose to 98.36 on Tuesday, the highest since April 9, 2025.