China’s yuan rose to its strongest level in more than three years against the US dollar on Monday, as the central bank appeared to ease its efforts to restrain the currency’s appreciation ahead of this week’s meeting between US President Donald Trump and Chinese President Xi Jinping.
US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng concluded talks in New York on Sunday, paving the way for Trump and Xi to hold their summit from September 23 to 25.
The two leaders are expected to discuss artificial intelligence, trade relations, supply chains and tensions in the Middle East, although analysts do not expect a major policy breakthrough.
The yuan climbed as high as 6.6950 per dollar, its strongest level since January 16, 2023. It ended the domestic session at 6.6955, marking its strongest close since June 30, 2022.
The offshore yuan also strengthened to 6.6946 per dollar, up about 0.03% in Asian trading.
Before the market opened, the People’s Bank of China (PBOC) set the yuan’s midpoint rate at 6.7487 per dollar, its strongest level since February 3, 2023.
The midpoint was 536 pips weaker than the market estimate. The yuan is allowed to trade within 2% on either side of the daily fixing.
For almost a year, the central bank has set its official daily yuan guidance weaker than market expectations, a policy that traders and analysts have viewed as an effort to slow the currency’s rise.
That approach appears to have shifted this month, with the official midpoint strengthening more rapidly and its gap with market expectations narrowing.
The gap had reached its widest point since February, but the recent move suggests the PBOC has become more comfortable with further yuan appreciation.
Goldman Sachs analysts said the stronger fixing ahead of the Trump-Xi summit was consistent with recent patterns and could give the offshore yuan more room to strengthen.
“The fact that the summit is occurring should help maintain a stable trading relationship… policymakers in China should continue to feel comfortable allowing sustained but gradual currency appreciation,” the analysts said.
Other major currency markets were largely subdued as investors assessed the global interest-rate outlook following a series of rate hikes by major central banks last week.
The dollar index, which measures the US currency against six major peers, was steady at 100.23 after rising more than 1% the previous week following a hawkish rate hike by the Federal Reserve.
OCBC said a stronger and relatively stable yuan could provide a more constructive environment for US-China negotiations and reduce the likelihood of renewed accusations of competitive currency depreciation.
However, the bank cautioned against viewing the PBOC’s latest move as the beginning of a prolonged period of yuan appreciation.
“Given the wide US-China yield differential and still-soft domestic fundamentals, part of the recent appreciation may reflect policy-managed stability around the summit rather than a fundamental re-rating of the RMB,” OCBC said.
Onshore and offshore money-market indicators showed overnight dollar/yuan swaps at -5.50 pips in both markets.
Three-month SHIBOR stood at 1.4%, compared with 1.6% for three-month CNH HIBOR.
Ojo Triumph
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