Offshore Yuan Extends Recovery

The offshore yuan strengthened to around 6.884 per USD, extending its recovery from last week’s losses, as the economy signaled resilience despite the deepening Iran war, while markets weighed Trump’s request to delay a planned summit with China. He asked Xi Jinping to postpone their meeting by about a month so he could remain in Washington to oversee the conflict, though the delay may be manageable for Beijing as officials from both sides met in Paris in recent days to continue trade talks. Treasury Scott Bessent also said any postponement would be due to scheduling considerations rather than pressure on China over the vital shipping route. Meanwhile, recent data showed China’s factory output growth accelerated in January-February while retail sales rebounded. Also, despite the US dollar’s strength as investors sought safe-haven assets during the Iran war, the yuan remained supported by China’s lower exposure to oil shocks, resilient exports, and exporters’ continued dollar selling.

The offshore yuan edged up to around 6.901 per USD on Monday, halting losses from the previous week as investors weighed fresh geopolitical and trade developments, while China’s key economic data came in strong at the start of the year. Data showed industrial output, retail sales, and fixed-asset investment all surpassed expectations, pointing to firmer momentum early in the year. However, challenges persisted as the property sector remained under pressure and unemployment ticked higher. Officials also cautioned that rising geopolitical tensions could cloud the outlook, particularly as the expanding Middle East conflict threatens global growth and trade. In the latest update, President Trump ordered strikes on Iranian military assets on Kharg Island and warned of further attacks on crude facilities. He also signaled a potential delay to his Beijing summit unless China helps reopen the Strait of Hormuz. Still, the numbers suggest that China may be less exposed to the Hormuz disruption.

The offshore yuan depreciated to around 6.89 per dollar on Friday, extending losses from the previous session as investors weighed fresh U.S. trade probes targeting several economies, including China. The Trump administration launched a new investigation under Section 301(b) to examine whether policies in key economies, particularly those related to forced labor, are “unreasonable or discriminatory” and harm US commerce. This follows a probe on Wednesday under the same section, which allows the president to impose tariffs on countries found to be engaging in unfair trade practices. The latest investigations are complicating US–China relations and threatening the fragile trade truce ahead of a high-stakes summit in Beijing. Externally, the yuan was also under pressure from a strengthening US dollar, fueled by safe-haven demand amid escalating Middle East tensions. Despite the declines, the offshore yuan remains on track for a weekly gain.