Offshore Yuan Steady After Trade Data

The sources say that China's major state-owned banks were seen buying dollars in the onshore market this week and held on to them in what a not so typical situation in the Chinese market. The dollar buying comes as state banks tried to smooth out the surging rise of the yuan currency.

However, this time around lenders did not appear to recycle the dollars into the swap market. For some context, this helps to keep dollar liquidity tighter and indirectly raise the cost of long yuan positions.

One of the sources noted that the moves here are directed to moderate the pace of yuan gains, not so much so to reverse the recent uptrend against the dollar.

So far this year, the yuan is up over 3% against the dollar year-to-date and that will mark the biggest yearly jump in the currency against the greenback since 2020. USD/CNY took out the floor of 7.10 last week and nearly touched 7.06 this week before a slight bounce today to 7.07, still keeping at its weakest levels since October last year. This article was written by Justin Low at investinglive.com.

The offshore yuan weakened to around 7.05 per dollar, retreating from a more than one-year high in the prior session after the People’s Bank of China set a weaker-than-expected daily fixing.

The PBOC set the midpoint at 7.0733 per dollar, 179 pips below the Reuters consensus and marking the largest weak side deviation since November 2022.

The move signaled policymakers’ intention to temper the currency’s recent appreciation and reaffirmed the PBOC’s focus on currency stability.

Despite the retreat, the yuan is still poised for its best annual showing since 2020, supported by improving US-China relations and a weaker greenback.

Meanwhile, investors are closely watching the upcoming Central Economic Work Conference and the December Politburo meeting.

China is expected to retain its “around 5%” annual economic expansion target next year, an objective that could prompt Beijing to maintain accommodative fiscal and monetary policies as it works to reverse the current deflationary pressures.

The offshore yuan strengthened past 7.06 per dollar, hitting its highest level since October 2024, supported by a strong central-bank fixing and improving sentiment toward the currency.

The People’s Bank of China set the daily midpoint at 7.0754 per dollar, its firmest level since mid-October 2024, reflecting the central bank’s commitment to maintaining currency stability.

Adding to yuan's appreciation, several investment institutions expect the yuan to strengthen further next year, potentially pushing the currency past the psychologically significant 7-per-dollar threshold for the first time since 2023.

Externally, the yuan found support from a weakening US dollar amid rising expectations of an upcoming Federal Reserve rate cut.

On the economic front, a private survey showed China’s Composite PMI easing to a four-month low of 51.2 in November.

The services sector slowed to a five-month low of 52.1, while the manufacturing gauge slipped to 49.9, its weakest reading in four months.

The offshore yuan traded around 7.07 per USD, near its highest level since early October last year, as a broadly softer US dollar offset weak factory activity data in China.

The softer greenback continued to support the currency, with investors looking ahead to a crucial month that could bring the Fed’s final rate cut of the year and the confirmation of a dovish successor to Chair Jerome Powell.

Domestically, a private survey showed China’s factory activity slipping back into contraction in November, reflecting continued weakness in domestic demand.

This followed official data released on Sunday showing another month of subdued manufacturing and a cooling services sector.

Market participants now closely watched the yuan’s daily official fixings for hints on the PBOC’s stance as signs emerged that the central bank is aiming to temper its recent gains.

Traders are also focused on next month’s Central Economic Work Conference for potential signals on the policy agenda for next year.

The offshore yuan steadied around 7.07 per dollar on Friday, remaining on track for monthly gains as a weakening US dollar supported the currency.

The greenback declined as markets increased expectations for a further Federal Reserve rate cut in December, with futures now pricing in an 87% probability of a 25-basis-point reduction.

Meanwhile, the People’s Bank of China set the daily midpoint rate at 7.0789 per dollar, marking the second consecutive session in which its official guidance came in weaker than market expectations.

On the economic front, investors are bracing for the upcoming PMI release this weekend before turning their attention to the Central Economic Work Conference (CEWC) in December for potential signals on the policy agenda for 2026.

Offshore yuan weakened to around 7.07 per dollar, retreating from a thirteen-month high reached in the previous session following the People’s Bank of China’s first weaker-than-expected fixing in months.

The central bank set the daily midpoint at 7.0779 per dollar, softer than Reuters’ forecast of 7.0733.

This marked the first downside surprise in the fixing since July 1, a move investors interpret as an effort to temper the currency’s appreciation and prevent excessive near-term gains.

Meanwhile, investors are awaiting the upcoming PMI releases due this weekend for fresh insights into China’s economic momentum amid persistent domestic and external headwinds.

Investors are also looking ahead to the forthcoming Politburo meeting and December’s Central Economic Work Conference (CEWC) for potential signals on next year’s macroeconomic strategy and policy priorities.