Chinese Yuan Hits 3-year High

The offshore yuan strengthened to around 6.75 per dollar on Monday, extending gains from the previous week and reaching its highest level since January 2023, as a reported US-Iran peace breakthrough triggered broad-based dollar weakness and boosted regional currencies. The tentative agreement reportedly includes the reopening of the Strait of Hormuz, a cessation of hostilities, and a framework for negotiations over Iran's nuclear program. Iranian Deputy Foreign Minister Kazem Gharibabadi also confirmed the agreement, with officials from both countries expected to meet in Switzerland to formally sign the deal. However, key details remain unresolved, while no official text has yet been released. On the domestic front, investors continued to assess the strength of China's economy following recent signs of uneven growth, particularly industrial production, retail sales, and unemployment figures.

The Chinese Yuan touched 6.76 against the USD, the highest since February 2023. Over the past 4 weeks, US Dollar Chinese Yuan lost 0.83%, and in the last 12 months, it decreased 5.91%.

The offshore yuan firmed to around 6.77 per dollar, as investors assessed the latest inflation data and their implications for China's economic outlook. Consumer inflation rose 1.2% annually in May 2026, slightly below expectations of 1.3%, indicating that weak household demand continued to offset inflationary pressures from higher global energy prices linked to the Middle East conflict. Meanwhile, producer prices climbed to 3.9% from 2.8% in April and marking the highest reading since July 2022. The increase extended the recovery from China's long producer-price deflation period, driven largely by higher commodity and energy costs. While China has cushioned part of the energy shock through its strategic oil reserves and renewable energy capacity, persistent cost pressures could squeeze corporate profit margins. A broader pass-through to consumer prices could also erode household consumption, although weak domestic demand has so far limited such spillovers.