Offshore Yuan Rises to Multi-Year High

The Chinese Yuan touched 6.78 against the USD, the highest since February 2023. Over the past 4 weeks, US Dollar Chinese Yuan lost 0.65%, and in the last 12 months, it decreased 5.5%.

The offshore yuan strengthened to around 6.78 per dollar on Monday, reaching its strongest level since February 2023, as the greenback weakened amid signs of a diplomatic breakthrough in the Middle East. Over the weekend, a senior US official said that Washington and Tehran are edging closer to a deal that could reopen the Strait of Hormuz. However, President Donald Trump stressed that he would not “rush” into an agreement, while Iranian officials warned that the draft could still collapse. Meanwhile, Chinese President Xi Jinping is reportedly set to visit North Korea as early as this week or in early June, following his recent hosting of Presidents Donald Trump and Vladimir Putin within the span of a week. On the domestic front, investors are also turning their attention to China’s upcoming PMI data releases later this week, which are expected to offer fresh clues on the health of the economy following recent signs of slowing momentum in industrial output and retail sales.

The offshore yuan held steady for a second straight session at 6.80 per dollar on Friday after the People’s Bank of China kept its benchmark lending rates unchanged. The PBoC held the one-year loan prime rate at 3% 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. Meanwhile, Chinese President Xi Jinping is reportedly set to visit North Korea as early as next week, his first in seven years, and signaling warming ties after the resumption of cross-border rail and air services. The offshore yuan is set for a weekly gain.