Offshore Yuan Holds Firm at 2022 High

The offshore yuan traded around 6.66 per dollar on Friday, holding near its strongest level since May 2022, as Beijing continues its efforts to expand the currency’s international role. Reports emerged that China is considering issuing dollar- and offshore yuan-denominated bonds as early as this month, with officials at the Ministry of Finance reportedly working with investment banks on potential debt sales. China successfully raised 6 billion yuan ($900 million) in May during its first offshore yuan-denominated sovereign bond issuance in Hong Kong. The sale generated exceptional demand, with total orders exceeding the offer amount tenfold. However, gains were tempered by the central bank’s decision to raise the foreign exchange reserve requirement ratio to 6% from 4%. Investors viewed the move as one of the PBOC’s clearest interventions yet to curb the yuan’s prolonged appreciation. The currency has gained roughly 5% year-to-date, supported by resilient export demand.

The offshore yuan slid to around 6.66 per dollar on Tuesday, retreating from a more than four-year high in the previous session after the People’s Bank of China moved to curb its rapid appreciation by raising the foreign exchange reserve requirement ratio. The central bank announced a 2-percentage-point increase in the ratio to 6% from 4%, effective November 15. The move aims to drain foreign currency liquidity from the onshore interbank market, making it more costly for financial institutions to hold dollars and discouraging commercial lenders from selling them, thereby slowing the yuan’s recent gains. The yuan’s rally has been underpinned by robust export growth, with shipments surging 36.3% year-on-year to USD 447.18 billion in September 2026, marking the fastest annual increase in seven months. Strong global demand for electronics and semiconductors continued to support exports, helping the currency appreciate around 5% so far this year.

The offshore yuan strengthened to around 6.64 per dollar on Monday, extending its winning streak to a fifth consecutive session and reaching its strongest level since June 2022, after the People’s Bank of China announced a shift in its short-term monetary policy framework toward the overnight rate. Under the new framework, the central bank will introduce daily overnight reverse repo operations at a fixed rate of 1.25%, bringing the overnight rate closer to becoming its primary policy anchor and gradually replacing the long-standing seven-day benchmark. The newly disclosed 1.25% rate is below the existing 1.4% seven-day reverse repo rate and broadly in line with market expectations and prevailing borrowing costs. Meanwhile, weak official PMI data highlighted persistent economic headwinds. Manufacturing PMI fell to a three-month low of 49.3 in October 2026 from 50.1 in September. Non-manufacturing PMI also declined to 49.7 from 50.2, signaling a contraction for the sixth time in 2026.