The offshore yuan strengthened to around 6.9 per dollar on Friday, clawing back part of the previous session’s losses as sentiment improved on the back of China’s efforts to expand the currency’s role in global markets. Demand for yuan financing remains underpinned by Beijing’s low interest-rate environment, where persistent deflation has kept borrowing costs contained.
Additional support has come from investors seeking to diversify away from the US dollar, the People’s Bank of China’s recent cross-border financing initiatives, and increasing calls from economists for looser capital controls to bolster the yuan’s international appeal.
Separately, China’s central government has proposed a defense budget of CNY 1.91 trillion for fiscal year 2026, representing a 7% increase from the previous year. If endorsed, it would mark the 11th consecutive year of single-digit defense spending growth and the smallest annual rise since 2021.
Despite Friday’s rebound, the yuan remains on track for a weekly decline, pressured by a stronger US dollar amid heightened safe-haven demand driven by tensions in the Middle East.
