Offshore Yuan Hovers Near 3-Year High

The offshore yuan traded around 6.81 per dollar, hovering near its strongest level since March 2023, supported by improved sentiment following renewed diplomatic signals between the US and Iran. Trump stated that Tehran had reached out for a deal, while Iranian President Pezeshkian signaled a willingness to continue talks if they align with international law. The remarks came after the first talks failed to produce an agreement, prompting the US to announce a blockade of the Strait of Hormuz. The Middle East war has boosted interest in China’s currency as a dollar alternative, reviving “petroyuan” talk promoted by Xi Jinping. The yuan has gained traction in energy trade, with Iran accepting it for oil and reportedly favoring ships using it through the Strait of Hormuz. Separately, Xi is expected to meet Vietnam’s leader To Lam this week to strengthen energy ties amid supply risks. Domestically, investors are waiting for upcoming trade data, with exports and imports expected to ease.

The offshore yuan weakened to around 6.83 per dollar on Monday, snapping a six-session winning streak, as the greenback strengthened broadly after US–Iran peace talks ended without a breakthrough. The face-to-face negotiations between the two countries’ delegations concluded with both sides acknowledging that significant differences remain, while President Trump announced that the US Navy would begin a blockade of the Strait of Hormuz, raising further concerns about potential disruptions to global energy supplies. Trump also warned that countries, including China, could face tariffs of up to 50% if they support Iran militarily, though Beijing denied any involvement. On the domestic front, investors are closely watching a packed economic calendar this week. Key data releases, including the trade balance, Q1 GDP growth, industrial output, retail sales, and the unemployment rate are expected to provide fresh insights into the strength and trajectory of the economy.

The offshore yuan edged lower to around 6.83 per dollar, ending a five-session winning streak, after the People’s Bank of China reaffirmed its cautious monetary easing stance, even as consumer inflation slowed and producer prices rebounded. Annual consumer inflation slowed more than expected to 1% in March 2026 from 1.3% in February, as the seasonal boost from holiday spending faded. The PBoC maintained its cautious stance at a quarterly meeting last month, signaling limited appetite for aggressive easing after a modest rate cut in 2025. Meanwhile, producer prices rose 0.5%, beating forecasts and marking the first increase since September 2022, driven partly by higher global energy costs amid Middle East tensions. While China’s strategic reserves and diversified energy supply have cushioned the impact, signs of domestic pass-through are emerging, as authorities raised retail fuel prices for the third time since late February. Over the week, the yuan is set for its second weekly gain.