Chinese Yuan Surpasses 7 per Dollar for First Time Since September 2024

China | EcoPulse24

The Chinese yuan recorded a notable rise, surpassing the psychological barrier of 7 yuan per US dollar for the first time since September 2024. This reflects market bets that the People's Bank of China (PBOC) will permit a gradual appreciation of the currency to enhance confidence in financial markets.

The offshore yuan rose by approximately 0.1% to reach 6.9985 per dollar during Thursday trading, after the central bank set its daily reference rate at the strongest level in over a year, signaling a more supportive stance for the currency.

This movement comes as the yuan heads for its best annual performance against the dollar in about five years, supported by a weakening US dollar, increased investment inflows into Chinese equities amid improving sentiment, and a relative easing of geopolitical tensions.

In recent months, Beijing has steered the yuan towards stronger levels through its daily fixing mechanism, aiming to support the currency without triggering sharp volatility in the foreign exchange market, as authorities seek a balance between financial stability and capital attraction.

Despite the recent gains, several analysts believe the yuan remains undervalued on a trade-weighted basis, especially amid ongoing deflationary pressures in the Chinese economy. Goldman Sachs estimates the yuan to be around 25% below its fair value compared to economic fundamentals.

Analytical View | EcoPulse24

The yuan breaching the 7 level against the dollar signals an important shift in China’s currency management policy, moving gradually towards allowing more strength to support confidence and investment, while maintaining control over volatility. If capital inflows into Chinese markets continue alongside a weaker dollar, the yuan could see a more orderly appreciation in the coming period, with central bank intervention remaining a key factor in the pace of this movement.