23.12.202505:34:36UTC+00Offshore Yuan Hits Fifteen-Month High

The offshore yuan appreciated to approximately 7.02 per dollar on Tuesday, reaching its highest level in fifteen months. This occurred despite the People’s Bank of China indicating caution through its official guidance rate. The central bank set its daily midpoint at 7.0523, marking the strongest level since September 2024, though it remained below market expectations, reflecting their cautious stance amid the currency's rapid appreciation. This year, the yuan has climbed over 3.8%, positioning it for the largest annual gain since 2020. This rise is attributed to a generally weaker dollar, improving Sino-US trade relations, and robust Chinese exports. Additionally, year-end demand from exporters who are converting foreign earnings into yuan has further bolstered its strength. Analysts anticipate that the yuan will continue to appreciate gradually in the coming year, potentially reaching the 7-per-dollar threshold. However, challenges persist within China’s economy, as indicated by domestic reports of declining factory output and retail sales. Nevertheless, the trade surplus with the US, which surpassed $1 trillion in the first eleven months of the year, remains a source of support for the currency.