Chinese Yuan Hits 32-Month High at 6.96 per Dollar Backed by Strong Central Bank Fixing

Beijing | EcoPulse24

The Chinese yuan showed notable strength in offshore trading, rising to around 6.96 per US dollar and reaching its highest level in 32 months. This was supported by the strongest daily exchange rate fixing by the People’s Bank of China in over two years, which helped offset mixed domestic growth data. The move occurred in a favorable external environment with the US dollar weakening and reflected a monetary commitment that could allow further yuan gains.

On the economic front, China’s GDP growth slowed to 4.5% in the fourth quarter from 4.8% in the third quarter, marking the slowest pace in nearly three years but still beating market forecasts of 4.4%. For the full year, growth reached 5%, matching Beijing’s target and mirroring the pace projected for 2024. This performance was underpinned by a record trade surplus, as strong exports to non-US markets offset the impact of US tariffs.

December data revealed a decline in domestic consumption and a deeper drop in investment, though the manufacturing sector showed improvement. Monetarily, the People’s Bank of China set the midpoint at 7.0051 per dollar, the strongest since May 18, 2023, signaling official tolerance for further yuan appreciation. Externally, the weaker US dollar provided additional support, as demand shifted toward alternative safe-haven currencies amid US tariff threats against Europe.

Analysis
The prevailing trend reflects a careful balance between a supportive monetary message for the yuan and a domestic economy showing a contrast between strong external trade and weak internal demand. Allowing further yuan appreciation, alongside a weaker dollar environment, gives the currency short-term momentum, though sustainability will depend on the domestic recovery catching up with trade in supporting growth.