The offshore yuan recently appreciated to approximately 7.01 against the dollar, reaching its highest point in fifteen months. This boost is attributed to a robust official midpoint setting and typical year-end demand. As the year concludes, exporters often convert more foreign currency into yuan to fulfill payment and administrative needs, a pattern that may persist into January as the Lunar New Year approaches. Furthermore, the People's Bank of China established the daily midpoint at 7.0471 per dollar, marking its strongest position since September 30, 2024. This figure remains below market predictions, indicating the Bank's attempt to temper rapid appreciation.
Despite this strong midpoint setting, the bank has repeatedly maintained it below expectations since late November, a strategy traders view as an effort to control the yuan’s momentum. Year-to-date, the currency has strengthened by approximately 3.9%, on track for its largest annual appreciation since 2020. This is supported by the relative weakness of the dollar, the easing of US-China trade tensions, and the resilience of Chinese exports.
