Offshore Yuan Holds Decline

The offshore yuan held its decline around 6.71 per dollar on Tuesday, staying off its recent more than three-year high as mixed economic data underscored the fragility of China’s recovery. Fixed-asset investment declined 7.2% in the January–August period, marking the steepest drop for the period since January–April 2020, while retail sales growth slowed to a three-month low of 0.4% in August. The unemployment rate edged up to a five-month high of 5.3% from 5.2% in July. On the positive side, the house price index fell 3% yoy in August, the softest decline since December 2025, while industrial output growth accelerated to 5.2% from 4.5% in July. While China has begun to ramp up fiscal support following a prolonged decline in public spending, pressure remains on policymakers to deploy additional stimulus as economic growth risks falling below the official 4.5%-5.0% annual target for a second straight quarter.

The offshore yuan traded around 6.70 per dollar on Monday, hovering close to its strongest level since January 2023 as investors increasingly turned to the currency as a funding option for carry trades. The recent surge in the yen has prompted investors to look for alternatives such as the yuan, given China's relatively low interest rates and currency stability. While major central banks face pressure to keep rates elevated or tighten policy further, China's comparatively low borrowing costs allow investors to finance higher-yielding assets at a lower cost. On the economic front, annual consumer inflation rose to 0.8% in August, matching forecasts and accelerating from a six-month low of 0.5% in July. Producer price inflation also picked up to 3.8% from a three-month low of 3.5%, exceeding market expectations of 3.7%. The increase in price pressures was driven mainly by higher energy costs amid ongoing tensions in the Middle East.

The offshore yuan held steady around 6.70 per dollar on Tuesday, remaining near its strongest level since January 2023, as strong trade data reinforced optimism over China’s external demand. Exports climbed 25.0% year-on-year to USD 401.44 billion in August 2026, accelerating from 23.9% growth in July, while imports surged 28.2% year-on-year to USD 282.4 billion, picking up from 27.5% in July and extending double-digit growth for an eighth straight month. As a result, China’s trade surplus widened to USD 119.09 billion in August from USD 101.09 billion a year earlier, matching forecasts. The robust trade figures came as Washington stepped up pressure on Beijing to address trade imbalances ahead of a planned Trump-Xi meeting, while the two countries remain under a fragile tariff truce set to expire in November. Trade tensions between Beijing and Brussels are also mounting ahead of an October deadline to address imbalances, which EU leaders increasingly view as a strategic concern.