FX.co ★ Offshore Yuan Falls Amid Dollar Strength

On Friday, the offshore yuan fell below 7.25 per dollar, marking its lowest point in over a week, primarily due to the strengthening of the US dollar. This appreciation of the dollar was driven by comments from Fed Chair Powell, who indicated that the Federal Reserve is not in a hurry to reduce interest rates. Adding to the yuan's pressure, the People's Bank of China (PBOC) reduced its support for the currency through its daily midpoint fixings, signaling an intention to prevent any sharp or rapid depreciation against the US dollar. Regarding monetary policy, the PBOC maintained its key lending rates for the fifth consecutive month in March 2025, aligning with market expectations. The one-year loan prime rate stayed at 3.1%, while the five-year rate remained at 3.6%. Both are at record low levels following reductions in October and July of 2024. Nonetheless, the PBOC noted that it plans to lower interest rates and adjust the bank’s reserve requirement ratio when deemed appropriate.