(April 8): China’s yuan hit a three-year high as the pause in Middle East hostilities eased geopolitical tensions.
The onshore yuan rose to 6.8287 per dollar, the strongest level since March 2023, as the two-week ceasefire between the US and Iran boosted risk sentiment and weighed on the dollar. The offshore yuan hit 6.8268 per dollar, nearing a three-year high of 6.8267 touched in February.
The People’s Bank of China PBOC) also set a strong daily reference rate for the currency on Wednesday, signalling its tolerance for further appreciation as the pause in tensions fuels a global pivot towards risk assets.
The so-called fixing at 6.8680 per dollar on Wednesday was at its strongest since April 2023, after being strengthened by 0.3%, the most since March 10. Meanwhile, the fixing was weaker than the average estimate of 6.8361 from a Bloomberg survey with traders and analysts.
“The magnitude of the change in the daily fix corresponds with the broader US dollar move, but the gap with the estimate signals a preference for a more measured pace of decline in the dollar-yuan pair,” said Fiona Lim, a strategist at Maybank.
See also: Malaysian importers used ceasefire window to buy dollar — Citigroup
The yuan has climbed 2.2% against the dollar this year, outperforming its Asian peers, with Chinese assets emerging as havens following the outbreak of the Iran conflict. Investors have increasingly bet on China’s resilience to energy shocks, citing the nation’s vast strategic commodity reserves and its aggressive expansion into renewable energy.
Furthermore, the spike in oil prices is being viewed as a potential catalyst to help the economy break a years-long cycle of producer price deflation, further providing support for the yuan.
The PBOC has consistently bolstered the currency through firm daily fixings amid the war-induced market turmoil, a move designed to anchor investor confidence in Chinese assets. This daily reference rate — which limits onshore trading to a 2% range — advanced for six consecutive months through March.
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