Offshore Yuan Gains on PBOC Hold

The offshore yuan rose to around 6.80 per dollar on Wednesday, rebounding from the previous session after the People's Bank of China kept its benchmark lending rates unchanged. The central bank held the one-year loan prime rate (LPR) at 3.0% and the five-year LPR at 3.5% for a twelfth straight month in May, highlighting policymakers’ cautious stance amid heightened geopolitical tensions in the Middle East. The decision came despite signs of slowing domestic momentum, as industrial output slowed to its lowest level since July 2023, while retail sales eased to its weakest level since December 2022. Moreover, both consumer and producer inflation accelerated, driven largely by higher energy prices and ongoing supply-chain disruptions linked to the conflict. Still, the yuan’s gains were capped by a stronger US dollar, as emerging Asian currencies have come under pressure since the Middle East conflict began in February.

The offshore yuan steadied around 6.80 per dollar on Tuesday, following gains in the previous session as weak economic data boosted expectations of policy stimulus. In April 2026, new home prices across 70 major cities saw their sharpest decline since May 2025, while industrial output slowed to its weakest pace since July 2023. Retail sales growth also rose just 0.2% year-on-year, the weakest since December 2022. Moreover, China’s fixed-asset investment fell 1.6% year-on-year in the January–April period. Meanwhile, the surveyed urban unemployment rate edged down to a three-month low of 5.2% in April. On the monetary policy front, investors await the one-year and five-year loan prime rates due Wednesday, with markets expecting them to remain unchanged at 3% and 3.5%, respectively. Attention also turns to the Communist Party’s Politburo meeting in July, seen as a key moment for reassessing growth targets and policy direction.

The offshore yuan weakened to around 6.80 per dollar on Friday, pulling back from a more than three-year high reached in the previous session, as investors were underwhelmed by the lack of concrete details from the Trump–Xi summit. During the second day of talks at Zhongnanhai, Trump said “a lot of good” had come from the visit and claimed the two sides had reached “fantastic trade deals,” while Xi said both countries had agreed to stabilize trade ties, expand cooperation, and manage differences constructively. Among the notable developments from the summit, China is expected to purchase 200 Boeing aircraft and increase imports of US agricultural products to “double-digit billions” of dollars over the next three years. Moreover, Trump said Washington and Beijing “feel very similar” about the need to end the conflict and keeping the Strait of Hormuz open, while China’s foreign minister likewise called for the reopening and safeguarding of the critical maritime corridor.