China’s offshore yuan hits 3-year high as Beijing signals policy support
Politburo’s pledge to stabilise growth and boost capital markets helps drive rally, reinforced by days of relatively strong reference rates by the central bank
China’s offshore yuan rose to a fresh three-year high on Friday after the central bank set the currency’s daily fixing stronger than 6.79 per US dollar for three straight days and a high-level meeting signalled further policy support.
On Friday, the People’s Bank of China set the yuan’s midpoint, or the daily fixing rate, at 6.7894 per US dollar, marking the third straight session above 6.79. The level was marginally weaker than Thursday’s 6.7892, which was the strongest level since February 2023.
Following the move, the offshore yuan extended its rally to 6.7433 by early Friday afternoon, its strongest level since February 2023, according to Chinese financial data provider Wind.
“We are bullish [on] the Chinese yuan as a hedge against war, but potential stimulus is a reason to stay bullish even in peacetime,” Abbas Keshvani, Asia macro strategist from RBC Capital Markets, said on Thursday, pointing to the Politburo’s pledge to accelerate fiscal spending amid slowing growth.
In a note earlier this month, the strategist said the Chinese currency had outperformed traditional defensive currencies such as the Singapore dollar, Japanese yen and Swiss franc since the outbreak of the US-Israel war on Iran, adding that Chinese authorities tend to “marshal the currency through periods of volatility”.