Offshore Yuan Hits Fresh 13-Month High

The offshore yuan strengthened to around 6.87 per dollar on Wednesday, marking its third straight session of gains and reaching a near two-week high, as optimism over a potential resolution to the Middle East conflict dented demand for the greenback. President Trump said US forces would end operations in Iran within two to three weeks, while adding that any agreement was “irrelevant” to Washington’s timeline. Iranian President Masoud Pezeshkian stated that Tehran had the “necessary will” to end the conflict, provided that safeguards are in place to prevent renewed hostilities. The yuan gained further support as BOC Hong Kong works with regulators to upgrade digital wallets, following China’s move to allow interest on the currency, a step that could boost offshore adoption. Meanwhile, a private survey showed that the manufacturing PMI fell to 50.8 in March 2026, from 52.1 in February. In contrast, official data indicated that the manufacturing PMI rebounded to a one-year high of 50.4.

The offshore yuan edged higher to around 6.91 per dollar on Tuesday, extending modest gains from the previous session, supported by the unexpectedly strong return of expansion in PMI data. Official figures showed composite PMI rising to a three-month high of 50.5 in March 2026, signaling renewed growth across both sub-sectors. The manufacturing PMI rose to a one-year high of 50.4, while the non-manufacturing PMI increased to 50.1, supported by government stimulus, strong holiday spending, and solid exports despite global supply chain disruptions and volatile energy markets. However, while the Chinese policymakers have repeatedly emphasized the need to pivot the economy toward domestic consumption and reduce reliance on external demand, geopolitical risks, such as the ongoing Middle East war, could weigh on business activity in the coming months. The yuan is still on track for a monthly decline, as the US dollar continues to benefit from safe-haven demand amid geopolitical turbulence.

The offshore yuan edged higher to around 6.91 per dollar on Monday, trimming losses from the previous week despite subdued market sentiment amid escalating tensions in the Middle East. The US–Israel confrontation with Iran has thrown the region into turmoil, with the Strait of Hormuz, a key artery for global trade, effectively closed and threatened major energy facilities. However, China appears largely insulated from the crisis, holding substantial energy reserves and having invested heavily in alternative energy sources. Still, the yuan is expected to weaken in the near term, as ongoing conflict pushes oil prices higher and bolsters demand for the US dollar. On the trade front, Beijing has launched investigations into US trade practices in response to earlier probes by the Trump administration. This move follows the White House’s confirmation that Trump was scheduled to travel to China in mid-May for a long-awaited summit with President Xi Jinping.