Offshore Yuan Strongest Since 2022

The offshore yuan held around 6.69 per dollar on Tuesday, after recently hitting a more than four-year high, as central bank guidance kept the currency steady. The central bank set the yuan’s daily midpoint at 6.7298 per dollar, its firmest level since February 2, 2023, underscoring policymakers’ tolerance for yuan strength. The yuan was also underpinned by resilient Chinese exports and bullish calls from Western banks, which have argued that the currency remains undervalued. Goldman Sachs’ Kamakshya Trivedi indicated that the yuan is undervalued by 20% to 25%, as policymakers grow more comfortable with yuan appreciation to support trade ties and boost its global role. Meanwhile, China and the European Union recently reached an agreement that could reduce Chinese hybrid car exports to the bloc by more than half, as both sides seek to address the EU’s widening trade deficit with China amid growing tensions over trade imbalances and market access.

The Chinese Yuan touched 6.69 against the USD, the highest since July 2022. Over the past 4 weeks, US Dollar Chinese Yuan lost 0.27%, and in the last 12 months, it decreased 6.26%.

The offshore yuan rose to around 6.69 per dollar on Friday, after holding steady for two consecutive sessions as China defended its exchange-rate policy amid trade talks with the European Union. EU officials have increasingly pointed to exchange-rate imbalances, arguing that the yuan’s undervaluation bolsters Chinese exporters’ competitiveness and exacerbates the bloc’s widening trade deficit with China, which exceeds €1 billion ($1.12 billion) a day. Meanwhile, the People's Bank of China argued that exchange-rate adjustments alone would not resolve structural imbalances in the global economy and that China’s export strength reflects growing industrial competitiveness rather than currency policy. Both developments came as the yuan strengthened against most major currencies this year, while the euro has fallen more than 10% against the yuan from its January peak, weighed down by sluggish European growth and France’s fiscal challenges.