Offshore Yuan Slips on Dollar Strength

The offshore yuan traded around 6.78 per dollar on Thursday, hovering near its strongest level since February 2023, buoyed by encouraging domestic economic data. Industrial profits in China jumped 18.2% year-on-year in January–April 2026, supported by robust demand for Chinese electronics and elevated oil prices linked to Middle East tensions. The figures followed earlier signs of slowing economic momentum reflected in industrial output and retail sales data. However, gains in the yuan were limited by a stronger US dollar, as lingering uncertainty surrounding a potential US-Iran agreement continued to bolster safe-haven demand. The US recently confirmed defensive airstrikes on an Iranian military site, while key sticking points in negotiations, including Tehran’s control over the Strait of Hormuz and its nuclear program remain unresolved.

The offshore yuan weakened to around 6.78 per dollar on Tuesday, retreating from a more-than three-year high reached in the previous session as renewed military strikes eroded optimism over a potential US-Iran peace deal. The US conducted military strikes in southern Iran, targeting vessels allegedly attempting to lay naval mines, along with missile launch sites, in what Washington described as defensive operations. Further weighing on the yuan, the People's Bank of China set the midpoint rate at 6.8288 per dollar, 466 pips weaker than the Reuters estimate, though still its strongest fixing since February 2023. The central bank has continued to guide the midpoint softer than market expectations, a strategy widely viewed as an effort to preserve currency stability. The yuan is expected to remain broadly range-bound, supported by the PBoC’s stability-focused stance and easing corporate dollar-selling pressures.

The Chinese Yuan touched 6.78 against the USD, the highest since February 2023. Over the past 4 weeks, US Dollar Chinese Yuan lost 0.65%, and in the last 12 months, it decreased 5.5%.