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The Chinese yuan has maintained a strong upward trend against the US dollar since the beginning of the year, reaching its highest point in three years after surpassing the 6.83 level, fueled by a combination of domestic and international factors.
Yesterday, the onshore yuan was fixed at 6.8274 against the dollar, marking an increase of 323 basis points from the previous trading day and its strongest position since February 15, 2023, as announced by the China Foreign Exchange Trade System under the authority of the country’s central bank. The offshore yuan reached an intraday peak of 6.8215, the highest in April 2023.
The country’s central bank set the daily midpoint at 6.8680, up 174 basis points from the previous day. Meanwhile, the US Dollar Index slipped to as low as 98.68 from around 99.65.
The yuan’s rapid short-term surge is attributed to three key factors, according to Pang Ming, a senior fellow at a prominent financial research institute. First, positive economic data from the first quarter has strengthened market confidence in the recovery of domestic consumption and investment, attracting short-term speculative capital into the currency.
Second, exporters accelerated converting foreign earnings after settling their first-quarter accounts. Once the yuan broke through significant technical resistance levels, a rush of momentum-driven settlement orders emerged, quickly absorbing dollar liquidity and intensifying the upward movement.
Third, after a notable rise last month, the dollar index lost momentum, and a decline in safe-haven buying created a favorable external environment for the yuan’s appreciation, Pang explained.
Wang Qing, chief macro analyst at a leading credit rating agency, noted that the CFETS and other yuan basket indexes—measures reflecting the currency’s overall strength—have climbed to their highest levels in over a year. This signals a stable external trade environment, robust export growth, and improving domestic demand at the start of the year, providing strong fundamental support for the yuan.
Looking ahead, Pang suggested the yuan is likely to experience short-term fluctuations with potential for moderate long-term appreciation. As persistent foreign exchange settlement demands are fulfilled, some technical corrections may occur, especially above 6.8. Nevertheless, regulators have emphasized flexible two-way movement around an equilibrium rate, which helps prevent one-sided appreciation and supports market stability.
With external trade conditions stabilizing, ongoing efforts to stimulate domestic demand, and positive sentiment in currency markets, the yuan is expected to stay on a steady rise, even as the US dollar experiences significant swings, according to Wang.
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