The offshore yuan weakened to around 6.78 per dollar on Friday, putting the currency on track for a weekly loss as a resilient US dollar capitalized on intensifying rate-hike bets. While the Federal Reserve recently left interest rates unchanged as widely anticipated, roughly half of the FOMC policymakers now project at least one additional rate hike by the end of 2026. On the domestic front, traders are closely watching next week’s fixing of the one- and five-year Loan Prime Rates (LPR). The upcoming policy decision carries extra weight following a string of recent data underscoring China’s uneven economic growth. Meanwhile, Hong Kong is set to debut its highly anticipated offshore yuan bond futures this August. The milestone launch represents a strategic push by Beijing to cement the city’s status as a premier global offshore yuan hub while accelerating the broader internationalization of the currency.
Offshore Yuan Retreats from Multi-Year High
The offshore yuan slipped to around 6.76 per dollar on Tuesday, retreating from a more than three-year high reached in the previous session as investors weighed a mixed set of economic data from China. New home prices across 70 cities marked the 35th consecutive month of contraction and remaining at their steepest pace since May 2025, while fixed-asset investment declined more than market expectations in the January–May period. Moreover, retail sales unexpectedly fell in May, marking the first annual decline since December 2022. Providing some support, industrial output exceeded market expectations in May, accelerating from April’s near three-year low. In addition, the surveyed urban unemployment rate eased to a five-month low in May. Adding to the currency’s pullback, Allianz Global Investors scaled back some of its bullish yuan positions and shifted to a neutral stance, locking in gains after a rally that propelled the yuan to become Asia’s best-performing major currency this year.
Offshore Yuan Hits Multi-Year High
The offshore yuan strengthened to around 6.75 per dollar on Monday, extending gains from the previous week and reaching its highest level since January 2023, as a reported US-Iran peace breakthrough triggered broad-based dollar weakness and boosted regional currencies. The tentative agreement reportedly includes the reopening of the Strait of Hormuz, a cessation of hostilities, and a framework for negotiations over Iran’s nuclear program. Iranian Deputy Foreign Minister Kazem Gharibabadi also confirmed the agreement, with officials from both countries expected to meet in Switzerland to formally sign the deal. However, key details remain unresolved, while no official text has yet been released. On the domestic front, investors continued to assess the strength of China’s economy following recent signs of uneven growth, particularly industrial production, retail sales, and unemployment figures.
USD/CNH Price Forecast: More downside likely below 6.7500
- USD/CNH trades marginally lower to near 6.7750 as the US Dollar edges down.
- China’s CPI remains steady at 1.2% YoY in May, misses 1.3% estimates.
- Investors await the US inflation data for May.
The USD/CNH pair trades slightly lower to near 6.7750 during the early European trading session on Wednesday. The pair faces selling pressure due to continued outperformance by the Chinese Yuan (CNY), being a trade surplus economy.
On Tuesday, China’s Trade Balance data for May also came in stronger than projected. Trade Balance arrived at $105.43 Billion, higher than the $92.1 Billion estimate and the previous reading of $84.82 Billion. Imports grew strongly by 27.4%, while they were anticipated to rise moderately by 25% vs. the prior release of 25.3%. While Exports rose 19.4% against expectations of 15% and the previous release of 14.1%.
Meanwhile, China’s Consumer Price Index (CPI) data for May has remained steady at an annualized pace of 1.2%, while it was expected to grow at a faster pace of 1.3%.
At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.12% lower to near 99.87 ahead of the United States (US) CPI data for May, which will be published at 12:30 GMT. The US headline inflation is expected to come in higher at 4.2% Year-on-Year (YoY) from 3.8% in April.
USD/CNH technical analysis
USD/CNH trades lower at around 6.7763, extending the downside bias as spot holds below the 20-day Exponential Moving Average (EMA) at 6.7867. The pair trading below this short-term average suggests sellers retain control, while the 14-day Relative Strength Index (RSI) around 42 stays below the neutral 50 line, hinting at lingering bearish momentum rather than an oversold condition.
On the topside, immediate resistance is now aligned with the 20-day EMA at 6.7867, and a daily close above this barrier would be needed to ease current downside pressure and open the way for a more sustained recovery. On the downside, the pair could slide further towards 6.7500 if it falls below the June 2 low at 6.7580.
Offshore Yuan Remains Firm
The offshore yuan firmed to around 6.77 per dollar on Wednesday as investors assessed the latest inflation data and their implications for China’s economic outlook. Consumer inflation rose 1.2% annually in May 2026, slightly below expectations of 1.3%, indicating that weak household demand continued to offset inflationary pressures from higher global energy prices linked to the Middle East conflict. Meanwhile, producer prices climbed to 3.9% from 2.8% in April and marking the highest reading since July 2022. The increase extended the recovery from China’s long producer-price deflation period, driven largely by higher commodity and energy costs. While China has cushioned part of the energy shock through its strategic oil reserves and renewable energy capacity, persistent cost pressures could squeeze corporate profit margins. A broader pass-through to consumer prices could also erode household consumption, although weak domestic demand has so far limited such spillovers.
Offshore Yuan Holds Gains on Strong Exports
The offshore yuan held its gains around 6.78 per dollar on Tuesday, as stronger-than-expected trade data highlighted the resilience of China’s export sector despite signs of an economic slowdown. Exports surged 19.4% year-on-year to a record USD 376.8 billion in May, driven by inventory building aimed at mitigating rising shipping and energy costs linked to the Gulf conflict, alongside robust demand for semiconductors and AI-related products. While the Middle East conflict has yet to significantly affect exports, weak domestic demand continues to leave the economy vulnerable to a deterioration in global conditions, reinforcing expectations for further policy easing. Meanwhile, imports jumped 27.4% to USD 271.4 billion, beating forecasts of a 25% increase as firms stepped up purchases of foreign chips and equipment. Consequently, China’s trade surplus widened to USD 105.4 billion, its highest level since January.
Offshore Yuan Retreats on Mixed PMI Data
The offshore yuan weakened to 6.76 per dollar on Wednesday, retreating from a more than three-year high reached in the previous session, as investors weighed mixed PMI data that highlighted the fragility of China’s economic recovery. A private survey showed China’s Composite PMI rose to a three-month high of 54 in May, with the services PMI also reaching a three-month peak of 54.4. However, manufacturing activity lost momentum, with the PMI falling to 51.8 from April’s five-year high of 52.2. Earlier this week, official data painted a more subdued picture, showing the Composite PMI inching up to 50.5 from 50.1, supported by a modest pickup in non-manufacturing activity (50.1 vs 49.4), while the manufacturing PMI slipped to the expansion-contraction threshold of 50 from 50.3. Moreover, risk sentiment remained restrained amid renewed tensions in the Middle East after Iran launched ballistic missiles toward neighboring countries, prompting retaliatory US strikes on Qeshm Island.
Offshore Yuan Remains at Multi-Year High
The offshore yuan strengthened to around 6.76 per dollar on Tuesday, holding near its strongest level since February 2023, as investors increasingly regarded Chinese assets as a relative safe haven amid heightened geopolitical tensions involving Iran. Geopolitical uncertainty persisted after the latest developments indicated that Iran had suspended indirect talks with Washington over Israel’s military operations in Lebanon, even as US President Trump asserted that negotiations remained ongoing. China’s diversified energy supply base and comparatively limited direct exposure to the Middle East have reinforced the attractiveness of its financial markets during the conflict, underpinning the yuan’s resilience. However, further upside in the yuan may be capped by Beijing’s preference for exchange-rate stability, as reflected in the People’s Bank of China’s continued weaker-than-expected daily fixings, as well as potential dollar-buying interventions by major state-owned banks.
