CNH

The offshore yuan strengthened to around 6.72 per dollar on Thursday, extending overnight gains and reaching its strongest level since February 2023, as persistent weakness in the US dollar continued to support Asian currencies. The greenback remained under pressure as expectations for further Fed rate hikes eased, while the announcement of expanded bond buybacks boosted demand for longer-dated Treasuries and weighed on the dollar. However, gains in the yuan were tempered by a softer-than-expected fixing, with the PBOC setting the daily midpoint at 6.7808 per dollar, signaling authorities’ continued preference for a measured pace of currency appreciation. On the monetary policy front, the central bank kept its benchmark lending rates unchanged at record lows for a fifteenth consecutive month. The one-year loan prime rate (LPR) was held at 3.0%, while the five-year LPR remained at 3.5%, reflecting policymakers’ cautious approach amid lingering domestic and external uncertainties.

MUFG’s Asia FX Weekly highlights that China’s July activity indicators, following weak Q2 GDP, will be central for the Chinese Yuan and regional FX. The authors stress ongoing weakness in fixed asset investment and property-sector challenges, and question whether domestic demand is stabilizing and whether PBOC will tolerate continued CNY strength. They also note PBOC has been guiding USD/CNY lower via its daily fixing.

China data and fixing steer CNY

“In China, attention will centre on July activity indicators, following a weak Q2 GDP print.”

“Fixed asset investment is likely to remain weak, underscoring ongoing challenges in the property sector.”

“The key question for FX markets is whether domestic demand shows signs of stabilization and whether PBOC is comfortable allowing continued strength in CNY.”

“Any weaker-than-expected Chinese activity data could weigh on regional

Societe Generale analysts highlight CNY’s firm trend, with the currency advancing to 6.7424, its strongest level since February 2023, on Dollar weakness and lower US yields. The PBoC reiterates an accommodative stance and targeted support while avoiding explicit rate or RRR cut signals, as 10-year CGB yields fall below 1.70%.

Policy support underpins currency strength

“CNY maintains steady appreciation path: The CNY advanced to 6.7424 today, its strongest level since February 2023, supported by broad-based dollar weakness and lower US yields.”

“In its latest quarterly monetary policy implementation report, the PBoC reiterated its commitment to maintaining an appropriately accommodative policy stance and deploying targeted support measures when needed, while stopping short of explicitly signalling policy rate or RRR cuts.”

“Chinese bonds continue to demonstrate notable resilience, with the 10y CGB yield falling below 1.70% for the first time in a year after the PBoC’s first mid-month overnight reverse repo (liquidity injection).”

“Separately, the Ministry of Finance successfully sold 50y special sovereign bonds at an average yield of 2.2831%.”

The offshore yuan weakened to around 6.74 per dollar on Thursday, reversing gains from the previous session as a weaker-than-expected daily fixing by the People’s Bank of China weighed on the currency. The central bank set the midpoint rate at 6.7888 per dollar, 418 pips weaker than a Reuters estimate. While seasonal factors as September approaches could support the yuan, the extent of any gains will likely depend on the PBOC’s fixing strategy. The yuan’s decline was partly cushioned by a softer US dollar after inflation data reduced expectations of an imminent Federal Reserve rate hike. Meanwhile, the PBOC reiterated its commitment to rolling out targeted policy support while avoiding broad-based easing in its quarterly monetary policy report. Separately, the PBOC conducted no seven-day reverse repos for a third consecutive day on Thursday, while announcing plans to inject up to CNY 600 billion per day through overnight reverse repos on August 14 and August 17–19.

The offshore yuan weakened to around 6.74 per dollar on Monday, retreating from a more than three-year high reached in the previous session, as softer inflation data underscored persistent weakness in domestic demand. Annual consumer inflation eased to a six-month low of 0.5% in July, reflecting declines in food prices and slower growth in non-food costs. Producer price inflation also moderated to 3.5% from 4.1%, marking its first slowdown since returning to positive territory in March amid an oil-price surge triggered by Middle East tensions. Meanwhile, the Political Bureau of the Communist Party of China Central Committee recently pledged more proactive and effective macroeconomic policies, including the faster deployment of fiscal funds and bond proceeds, while continuing to support large-scale equipment upgrades and consumer goods trade-in programs. It also emphasized the need to boost domestic demand as consumer spending remains subdued despite solid exports and industrial output.

The offshore yuan held firm around 6.74 per dollar on Friday, remaining at its strongest level since early February 2023, as Beijing’s efforts to accelerate the yuan’s internationalization continued to bolster the currency. A growing number of Chinese commercial banks have added roughly a dozen currencies to their direct yuan settlement and clearing networks, including the Thai baht, Brazilian real, and Kazakhstani tenge. The latest move is expected to help Chinese firms further reduce their dependence on the US dollar as the country’s trade ties and overseas investments continue to expand, while also supporting President Xi Jinping’s ambition to build a “powerful currency.” Meanwhile, investors awaited upcoming trade data after China unveiled fresh retaliatory measures against the US, including tighter drone export controls, sanctions on seven American firms, and its first national security probe linked to foreign trade.

The offshore yuan held its gain around 6.74 per dollar on Wednesday, staying at its strongest level since early February 2023 as improving prospects for a renewed Middle East agreement boosted risk sentiment. Qatar said mediation efforts between the US and Iran had entered an advanced phase, with a draft agreement already prepared. US officials signaled growing confidence that a deal could be reached soon, raising hopes for the reopening of the Strait of Hormuz. On the domestic front, a private survey showed China’s Composite PMI fell to a one-year low of 50.8 in July 2026, reflecting slower momentum across the economy. The manufacturing PMI eased to a four-month low of 50.9, while the services PMI slipped to its weakest level in nearly two years at 50.4. Meanwhile, the People’s Bank of China announced a CNY 500 billion three-month outright reverse repo operation to maintain ample liquidity in the banking system, with bids determined through multi-tier interest-rate pricing.

The offshore yuan held its gains around 6.74 per dollar on Friday, remaining at its strongest level since February 2023, as investors raised expectations for additional policy support following PMI data releases. Official figures showed China’s manufacturing PMI fell to 49.2 in July 2026 from 50.3 in June, marking its first contraction since February, while the non-manufacturing PMI slipped to 49.0 from 50.2, signaling a renewed downturn after two months of modest expansion. The weak readings followed data showing Q2 GDP growth missed expectations and fell below the government’s 4.5%-5% target range. At the Politburo meeting, authorities vowed timely policy measures and to accelerate public spending and government bond fund usage. However, policymakers are expected to adopt a cautious approach to unveiling additional stimulus measures amid double-digit export growth.