Offshore Yuan Holds Firm at Multi-Year High

The offshore yuan held firm around 6.74 per dollar on Friday, remaining at its strongest level since early February 2023, as Beijing's efforts to accelerate the yuan's internationalization continued to bolster the currency. Chinese banks have expanded direct yuan settlement and clearing services to about a dozen additional currencies, including the Thai baht, Brazilian real, and Kazakhstani tenge, helping reduce reliance on the US dollar and supporting Beijing's push to strengthen the yuan's global role. The yuan also drew support from robust trade data, which showed that although export and import growth moderated in July, both remained strong amid solid demand for AI-related technology products. The latest data came after Beijing recently unveiled fresh retaliatory measures against Washington, including tighter controls on drone and related technology exports, sanctions on seven US firms, and its first national security investigation tied to foreign trade.

The offshore yuan held its gain around 6.74 per dollar on Thursday, staying at its strongest level since early February 2023 as improving prospects for a renewed Middle East agreement boosted risk sentiment. Qatar said mediation efforts between the US and Iran had entered an advanced phase, with a draft agreement already prepared. US officials signaled growing confidence that a deal could be reached soon, raising hopes for the reopening of the Strait of Hormuz. On the domestic front, a private survey showed China’s Composite PMI fell to a one-year low of 50.8 in July 2026, reflecting slower momentum across the economy. The manufacturing PMI eased to a four-month low of 50.9, while the services PMI slipped to its weakest level in nearly two years at 50.4. Meanwhile, the People’s Bank of China announced a CNY 500 billion three-month outright reverse repo operation to maintain ample liquidity in the banking system, with bids determined through multi-tier interest-rate pricing.

The offshore yuan steadied around 6.75 per dollar on Tuesday, holding near its strongest level since February 2023, as investors assessed fresh signals from the People's Bank of China aimed at supporting the economy. The central bank reaffirmed its commitment to maintaining an appropriately accommodative monetary stance, pledging to fine-tune policy tools when necessary and keep liquidity conditions ample to support growth. The central bank also underscored efforts to strengthen Shanghai's role as a hub for cross-border finance and offshore financial services, reinforce Hong Kong's position as the world's leading offshore yuan center. This followed the Politburo meeting, where authorities vowed timely policy measures and to accelerate public spending and government bond fund usage. On the economic front, a private-sector survey showed factory activity slowed to a four-month low in July 2026, highlighting persistent weakness in the sector.