CNH

• USD/CNH gains ground as the US Dollar advances on increased safe-haven demand linked to Middle East uncertainty.
• Trump said Iran’s ceasefire proposal was “not good enough” ahead of his Hormuz Strait deadline.
• The PBOC set the USD/CNY midpoint at 6.8854, higher than the 6.8773 estimate.

USD/CNH gains ground after registering modest losses in the previous session, trading around 6.8800 during the Asian hours on Tuesday. The pair appreciates as the US Dollar (USD) holds gains on increased safe-haven demand ahead of further developments on the Iran deadline by US President Donald Trump to open the Strait of Hormuz.

President Trump warned that he could target Iranian power plants and bridges unless his demands are met by 8:00 PM Eastern Time. Trump said on Monday that the latest proposal for a US ceasefire with Iran is “not good enough” ahead of his deadline for Iran to either reopen the Strait of Hormuz. “It’s not good enough, but it’s a very significant step,” Trump said, adding, “They’re negotiating now, and they’ve made a very significant step. We’ll see what happens.”

The Greenback receives support as Iran war surges energy prices, increasing fears of inflation revival and forcing the US Federal Reserve (Fed), to adopt a more hawkish stance. Traders are pricing in a delay of Fed rate cuts and could even raise borrowing costs later this year if inflationary pressures persist. Market participants are now looking ahead to the latest Federal Open Market Committee (FOMC) Meeting Minutes for clearer guidance on the central bank’s policy trajectory.

The People’s Bank of China (PBOC) set Tuesday’s USD/CNY reference rate at 6.8854, above the 6.8773 estimate, allowing the Yuan to trade within a +/-2% band around the midpoint.

Meanwhile, traders’ focus is shifting to Friday’s inflation data, with consumer prices expected to ease slightly, while producer prices are projected to post their first annual increase since 2022.

The offshore yuan strengthened to around 6.87 per dollar on Monday, extending gains from the previous week in thin holiday trading, even as geopolitical risks remained elevated. Tensions in the Middle East continue to cloud market sentiment, with US allies such as Pakistan, Egypt, and Turkey reportedly working to broker a roughly 45-day ceasefire aimed at averting potential US strikes on Iran’s energy infrastructure and possible retaliation from Tehran.

The latest developments follow President Donald Trump’s decision to extend his deadline to Tuesday for Tehran to reopen the Strait of Hormuz. However, Iran has rejected Washington’s ultimatum, stating it will only fully reopen the waterway once war-related damages are compensated. Domestically, investors are turning their focus to upcoming inflation data due later this week. Consumer inflation is expected to ease slightly, while producer prices are projected to post its first annual increase since September 2022.

The offshore yuan edged higher to around 6.88 per dollar on Friday, trimming gains from the previous session as market sentiment improved on growing hopes for the reopening of the Strait of Hormuz. Iran and Oman are said to be developing a protocol to “monitor transit” through the strategic waterway, a move aimed at easing regional tensions.

Elsewhere, countries such as India and the Philippines are actively negotiating with Tehran to ensure the safe passage of vessels, while also forming small diplomatic circles and exploring barter-style agreements. Meanwhile, China and Pakistan are advocating for their own multi-point diplomatic plan, as Iran maintains tight control over the shipping lane. Domestically, RatingDog data showed China’s composite PMI fell to 51.5 in March from 55.4 in February 2026, as both manufacturing (50.8 vs 52.1) and services (52.1 vs 56.7) sectors slowed. Over the week, the yuan is poised for a weekly gain, breaking a four-week losing streak.

The offshore yuan weakened to around 6.88 per dollar, ending a three-day winning streak as the greenback gained strength amid mounting uncertainties over a possible easing of the Middle East conflict. The US dollar rose as investors pared back expectations for Federal Reserve rate cuts, amid concerns that a surge in oil prices driven by the conflict could stoke rising inflation.

During his speech, Trump said the war in Iran was “very close” to completion and likely to meet its objectives in the coming weeks, while warning that military operations could intensify. Meanwhile, the PBoC drained CNY 890 billion through short-term operations and absorbed another CNY 250 billion via longer-term tools, reversing months of liquidity support after the economy’s deepest slowdown since reopening from Covid lockdowns in 2022. With growth rebounding and oil prices elevated by the Iran war, the central bank appears focused on curbing inflation while gradually steering China out of record deflation.

The offshore yuan stabilized around 6.88 per dollar on Wednesday, following significant gains in the previous session as optimism over a potential near-term resolution to the Middle East conflict dented demand for the greenback. US President Trump said American forces would end operations in Iran within two to three weeks, adding that Iran was “begging to make a deal” but that any agreement was “irrelevant” to Washington’s timeline.

Iranian President Masoud Pezeshkian earlier said Tehran had the “necessary will” to end the conflict, provided safeguards prevent renewed hostilities. The yuan gained further support as BOC Hong Kong works with regulators to upgrade digital wallets, following China’s move to allow interest on the currency, a step that could boost offshore adoption. Meanwhile, a private survey showed the manufacturing PMI fell to 50.8 in March 2026, from 52.1 in February. In contrast, official data indicated the manufacturing PMI rebounded to a one-year high of 50.4.

The offshore yuan edged higher to around 6.91 per dollar on Tuesday, extending modest gains from the previous session, supported by the unexpectedly strong return of expansion in PMI data. Official figures showed composite PMI rising to a three-month high of 50.5 in March 2026, signaling renewed growth across both sub-sectors.

The manufacturing PMI rose to a one-year high of 50.4, while the non-manufacturing PMI increased to 50.1, supported by government stimulus, strong holiday spending, and solid exports despite global supply chain disruptions and volatile energy markets. However, while the Chinese policymakers have repeatedly emphasized the need to pivot the economy toward domestic consumption and reduce reliance on external demand, geopolitical risks, such as the ongoing Middle East war, could weigh on business activity in the coming months. The yuan is still on track for a monthly decline, as the US dollar continues to benefit from safe-haven demand amid geopolitical turbulence.