(March 10): The onshore yuan rose after the People’s Bank of China strengthened the daily reference rate for the managed currency by the most since January 2025.
China’s currency advanced as much as 0.4% to around 6.88 per dollar on Tuesday. It had touched a one-month low in the last session as surging oil prices pummelled emerging Asian currencies.
Prospects of an end to the war in Iran have softened oil prices and supported regional currencies. Additionally, the yuan is gaining a tailwind from the PBOC’s stronger reference rate, which keeps the exchange rate within a 2% range around it.
“It seems the PBOC is comfortable to allow greater flexibility of USD/CNY despite global market volatility recently,” said Becky Liu, head of greater China strategy at Standard Chartered Bank HK Ltd. This probably reflects largely balanced supply-demand dynamics in the onshore market and relatively light speculative positions, she said.
The yuan has weakened around 0.3% this month amid the Middle East war, posting smaller losses than other Asian currencies, thanks to support from the PBOC’s fixing. That’s helped sustain bets on a stronger yuan in the options markets, with traders positioning for a move toward 6.50 per dollar by year end.
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The PBOC strengthened the yuan’s reference rate by 0.25% to 6.8982 per dollar on Tuesday. It was also the strongest level since April 2023.
StanChart’s Liu said the bank is maintaining its forecast for the currency to advance to 6.85 per dollar by year-end. She expects strong currency fundamentals, China’s push to internationalise it and a desire to reduce trade tensions to support bets on yuan gains.
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