SHANGHAI, – China’s onshore yuan hit the strongest level in nearly 15 months on Thursday, approaching 7 per dollar, aided by exporters’ year-end rush to convert dollar holdings into the local currency and by expectations the greenback will weaken further next year.
Although the yuan’s accelerating appreciation appears to have invited the central bank’s hand to slow its rise, many analysts say the trend is just beginning.
“The yuan’s previous headwinds may be turning into tailwinds propelling future strengthening,” Industrial Securities said in a note, referring to roughly $1.2 trillion worth of corporate dollar holdings that are being increasingly lured back to China.
“We could be witnessing just the start of the yuan’s appreciation.”
The yuan was trading at 7.0061 per dollar around lunch time, its strongest since late September 2024 and within a whisker of breaking the psychologically key 7-per-dollar mark.
The Chinese currency has strengthened roughly 5% against the greenback since early April as Sino-US trade tensions have eased and China’s resurgent stock market attracted foreign inflows.
“The yuan’s rise has been driven by an improving economy, interest rate cuts by the US Fed and self-fulfilling expectations of yuan appreciation,” Galaxy Securities said in a report.
In an apparent warning against currency overshooting, the People’s Bank of China pledged on Wednesday to stabilize market expectations and keep the exchange rate “basically stable at a reasonable and balanced level”.
Reflecting that effort, the PBOC set the yuan’s guidance rate at 7.392 per dollar before the market opened on Thursday, 244 pips weaker than the Reuters forecast.
“It indicates the central bank, which nods to a strengthening yuan, has started to slow down the pace of appreciation in a mild way,” Industrial Securities said.
The brokerage expects the yuan to strengthen further next year, when US monetary loosening will likely exceed market expectations, providing additional fuel to yuan’s rise.
This article was generated from an automated news agency feed without modifications to text.
