China’s offshore yuan reached a three-year high against the US dollar following a series of central bank actions and policy signals indicating increased support for the economy. On Friday, the People’s Bank of China (PBOC) set the yuan’s daily midpoint rate at 6.7894 per US dollar, marking the third consecutive day the fixing was stronger than 6.79, slightly off Thursday’s strongest level since February 2023 of 6.7892. The offshore yuan extended gains to 6.7433 by early afternoon, maintaining its most robust level in over three years.
The currency’s appreciation was bolstered by a Politburo meeting held Thursday, during which Chinese leadership pledged to enhance macroeconomic policy support and strengthen capital markets resilience throughout the remainder of the year. This commitment aims to stabilize growth amid concerns over slowing domestic economic activity and increasing global market volatility.
Analysts have interpreted these developments as signals of Beijing’s readiness to provide further fiscal stimulus. Abbas Keshavani, Asia macro strategist at RBC Capital Markets, noted the yuan’s relative strength, particularly against traditional safe-haven currencies such as the Japanese yen, Singapore dollar, and Swiss franc. Citing the Politburo’s promise to accelerate fiscal spending against a backdrop of slower growth, Keshavani described the yuan as a favorable hedge even in peaceful conditions.
Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered, attributed the yuan’s steady appreciation to Beijing’s emphasis on “balanced trade development,” a phrase underscored in the Politburo statement.
In related currency market developments, the Japanese yen experienced a significant rebound against the US dollar, rising more than 3 percent on Thursday to the strongest level in two months. This recovery followed a near four-decade low for the yen, prompting reports of government intervention. According to Nikkei Asia, Japanese authorities stepped in to purchase yen and sell US dollars to support the currency, while US officials also conducted a “rate check” amid market turbulence.
ING described the intervention as “well timed,” noting that US dollar weakness was already underway after Federal Reserve Governor Kevin Warsh expressed skepticism about the likelihood of a September interest rate hike. The Fed decided to hold rates steady on Wednesday, though three policymakers dissented in favor of a quarter-point increase.
Bank of America’s Shusuke Yamada remarked that the Japanese government’s recent intervention might prove more effective than previous efforts, despite persistently bearish sentiment toward the yen. Improvement in Japan’s balance of payments figures has supported this turnaround, with the yen trading at 160.476 per US dollar by early Friday afternoon.