The offshore yuan steadied around 6.97 per dollar on Friday, but traded at its strongest since May 2023, defying weaker central bank guidance as exporters continued selling dollars. The currency also recorded its largest annual gain since 2020, rising roughly 5% for 2025 to snap its three-year losing streak. The yuan’s rapid advance has prompted the central bank to prevent the yuan from overshooting through softer guidance rates and verbal warnings in state media, but has been unable to reverse the currency’s strengthening trend. Exporters’ ongoing conversion of foreign currency into yuan, driven by payments and administrative requirements, has likely continued into early January. The yuan’s strength was also underpinned by signs of restored confidence in the Chinese economy after data showed a better-than-expected performance in December’s manufacturing activity. A broadly weaker dollar added further support as the Federal Reserve’s policy stance on lowering rates became clearer.