The offshore yuan traded near 6.69 per dollar on Monday, its strongest level since July 2022, after a firm daily fixing by the People’s Bank of China lent support to the currency. The central bank set the midpoint at 6.7313 per dollar, the strongest since February 2, 2023, signaling policymakers’ growing tolerance for a stronger yuan. Additional support came from resilient Chinese export data and upbeat assessments from major Western banks, many of which argue that the yuan remains undervalued.
At the same time, China and the European Union recently reached an agreement that could cut Chinese hybrid vehicle exports to the bloc by more than half, as both sides move to address the EU’s widening trade deficit with China amid intensifying tensions over trade imbalances and market access. Investors are now focused on an upcoming slate of Chinese economic indicators, including inflation and trade figures.
