Yuan Continues to Rise, Achieving Its Longest Run of Gains Since 2010

Yuan Achieves Longest Rally Against Dollar Since 2010

The Chinese yuan continued its upward momentum on Thursday, notching its most extended streak of gains versus the US dollar in over a decade. This surge followed the People’s Bank of China’s daily reference rate, which indicated a willingness to allow the currency to appreciate in a controlled manner.

Onshore trading saw the yuan strengthen for the tenth consecutive day, reaching 6.8310 per dollar—a level not seen since April 2023. Earlier in the day, the central bank set its reference rate at 6.9228, marking the second day in a row of a stronger fix.

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According to traders who requested anonymity due to the sensitive nature of the information, exporters have been accelerating their conversion of foreign currency, which has contributed to the yuan’s strength. Meanwhile, some state-owned banks have intermittently made significant dollar purchases in the onshore market. Additionally, proprietary trading desks at certain banks have reportedly increased their short positions on the US dollar.

The latest central bank fix has led to speculation that Chinese policymakers may be open to a gradual appreciation of the yuan this year. Such a move could attract more foreign investment, reduce trade tensions, and advance China’s goal of making its currency more widely used internationally. The yuan’s recent gains have been supported by strong foreign exchange conversions, improving relations between the US and China, and a generally weaker US dollar.

Khoon Goh, head of Asia research at Australia & New Zealand Banking Group, commented, “Authorities are not trying to stop the yuan from rising, but they want to ensure the pace remains steady rather than rapid.” The bank has adjusted its year-end forecast for the onshore yuan to 6.75 from 6.85.

Over the past week, the onshore yuan has climbed about 1%, marking its fastest ascent since January 2025, according to Bloomberg data. In offshore markets, hedge funds have been purchasing USD/CNH put options, betting that the currency pair will continue to decline.

Looking ahead, further support for the yuan may come as US President Donald Trump is set to visit China next month for discussions with President Xi Jinping on tariffs—a development that could bolster the currency even more.

For now, market participants appear confident in the yuan’s prospects, showing little concern over the significant gap between the official fix and market expectations. Some analysts interpret this divergence as a sign that the central bank prefers a measured pace of appreciation. Thursday’s fix was 610 pips weaker than the average forecast of 6.8618 from traders and analysts surveyed by Bloomberg, representing a record difference on the side favoring a weaker yuan.

Understanding the PBOC’s Fixing Mechanism

Bloomberg’s survey typically reflects where market participants expect the central bank’s daily fix to be, based on overnight movements and excluding the so-called counter-cyclical factor. Any deviation from the actual fix is seen as an indication of how much the central bank is supporting or restraining the currency’s movement each day.

Reporting assistance by Ran Li and David Finnerty.

Story updated throughout.

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