Offshore Yuan Set for Monthly Gains

The offshore yuan traded around 6.84 per dollar, halting its recent decline and on track for monthly gains as stronger-than-expected PMI data signaled resilience in China’s economy despite rising external headwinds. Official figures showed the manufacturing PMI eased slightly to 50.3 in April from 50.4 in March, but still beat expectations of 50.1 and remained in expansion territory for a second straight month. A private survey also showed the manufacturing PMI climbing to 52.2 from 50.8, topping forecasts of 51 and marking its strongest level since December 2020. China’s strategic petroleum reserve management and continued investment in renewable energy have helped cushion the economy from external shocks linked to Middle East tensions. Meanwhile, US President Trump is expected to visit China between May 14 and 15, with reports suggesting Chinese President Xi Jinping will prioritize Taiwan, marking a shift from their last meeting in South Korea, where the issue was set aside.

The offshore yuan traded around 6.83 per dollar on Wednesday, remaining near a recent more than three-year high, as it heads into a period of expected seasonal weakness that may arrive earlier than usual this summer. Chinese firms are accelerating foreign exchange hedging ahead of a record wave of dividend payments scheduled for June through August, with mainland companies listed in Hong Kong expected to distribute nearly $70 billion in payouts. Instead of waiting closer to payout dates, many are locking in rates early due to lower cost of currency purchases and forward rates are cheaper than the spot market. Pressure on the yuan comes from renewed US–China tensions, including Washington’s sanctions on a major refiner and warnings of possible secondary sanctions on banks. Meanwhile, China’s blocking of Meta’s acquisition of AI startup Manus, along with stricter export compliance and supply chain rules, has further contributed to a more cautious sentiment for the yuan.

The offshore yuan weakened to around 6.83 per dollar on Tuesday, reversing gains from the previous session as the greenback strengthened amid persistent uncertainty over Washington’s diplomatic stance toward Iran. Officials said that US President Trump remains skeptical of Iran’s latest proposal to reopen the Strait of Hormuz and bring an end to the conflict, citing Tehran’s reluctance to meet key US demands. In China, the Politburo, one of the top decision-making bodies of the ruling Communist Party, pledged to strengthen energy security and cushion the economy against external shocks, emphasizing continued investment in advanced technology and tighter control over critical supply chains to boost self-sufficiency. Officials also pointed to a stronger-than-expected start to the year, with China’s economy expanding 5% in the first quarter. The data highlights the economy’s relative resilience compared with many peers amid energy and commodity disruptions linked to the Iran conflict.