Chinese Yuan Hits 3-year High

The offshore yuan held steady for the second consecutive session at around 6.70 per dollar on Thursday, as investors returned from the week-long Golden Week holiday. Investors continued to assess China’s most significant stimulus efforts since September 2024, aimed at helping the economy meet the government’s 4.5%-5.0% growth target this year rather than driving a broad-based economic revival. The measures include newly announced mortgage subsidies, expanded central bank funding facilities, and a State Council commitment to introduce “a package of practical and effective additional policies. The move came as months of weaker economic data raised concerns over a further loss of momentum following a disappointing second quarter. China’s economy expanded 4.3% year-on-year in Q2 2026, down from 5.0% in Q1 and below the 4.5% market consensus. The reading marked the weakest annual growth since Q4 2022.

The offshore yuan strengthened to around 6.70 per dollar on Tuesday, extending gains from the previous session as expectations for policy stimulus grew to support domestic demand and economy. China’s government bond issuance is set to accelerate in Q4 after local governments used only 81% of their annual special bond quota in the first nine months of 2026, while the State Council said it may activate unused borrowing quotas from prior years, potentially allowing debt sales to exceed the remaining 2026 allocation. The prospect of increased debt issuance comes as concerns over China’s economic growth and domestic consumption deepen. Meanwhile, investors looked ahead to a batch of official and private PMI surveys due on Wednesday, with particular attention on assessing the resilience of China’s manufacturing sector, which is supported by solid foreign demand and strength in technology-related industries.

The offshore yuan depreciated to around 6.72 per dollar on Friday, marking its fourth straight session of losses as traders weighed developments from the Trump-Xi summit in Washington. Artificial intelligence was a key topic during Thursday’s White House meeting, with both leaders discussing how to manage competition in the rapidly evolving sector. Ahead of the talks, Trump reiterated his opposition to stricter AI guardrails, while Xi said both countries have the “capability and responsibility” to ensure the technology remains under human control. Separately, Xi urged the US to explicitly oppose Taiwan independence, marking his first public appeal for Trump to reconsider Washington’s longstanding stance on the self-governed island. The White House has yet to release an official readout of the meeting, leaving Trump's response unclear. Externally, the yuan remained under pressure from a firmer US dollar as markets priced in around a 67% chance of a Federal Reserve rate hike in October.