FX.co ★ Offshore Yuan Steady After PBoC Decision

The offshore yuan remained stable at approximately 7.04 per dollar, lingering near a three-month peak as investors evaluated the People's Bank of China's (PBoC) recent decision to maintain steady loan prime rates. The central bank opted to retain its one-year Loan Prime Rate at 3.0% and the five-year Loan Prime Rate at 3.5%, marking the seventh consecutive month of holding these rates at historically low levels during its December session. Additionally, the PBoC chose to keep the seven-day reverse repo rate unchanged at 1.4%, following November’s data indicating decelerated growth in retail sales and industrial production, compounded by persistent challenges in the property sector. The yuan has been appreciating gradually since April, with the central bank carefully guiding its value through reference rates to mitigate carry-trade advantages and protect exporters from abrupt currency fluctuations. Projections suggest that, maintaining the current interest rate levels, the yuan could approach 7 per dollar by March and settle in the range of 6.8 to 6.9 by the end of 2026.