China appears to be prioritising currency stability and investor confidence over export competitiveness, signalling a policy tilt toward a stronger yuan despite pressure from a resurgent U.S. dollar.
Via Reuters take on the currency.
The People’s Bank of China (PBOC) reinforced that stance this week by raising its counter-cyclical adjustment factor when setting the daily USD/CNY midpoint, a move that effectively limits yuan depreciation. Even as the dollar index eased, the midpoint remained skewed toward yuan strength — underscoring the central bank’s resolve to prevent renewed weakness.
The yuan’s trade-weighted value has climbed in recent weeks, nearing levels seen before the U.S. “liberation day” tariffs imposed in April. While that may squeeze exporters, the policy aligns with Beijing’s efforts to boost investor confidence, attract foreign capital, and advance trade deals with major partners.
A Reuters poll last week showed the highest level of long-yuan positioning since mid-September, suggesting markets are increasingly convinced the PBOC will defend the currency. Analysts expect a gradual appreciation trend as China pushes to expand imports, lower U.S. tariffs, and finalise a free trade agreement with the EU.
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The PBOC’s firm stance against yuan weakness signals Beijing’s shift toward financial stability and investor confidence, reinforcing expectations of a stronger renminbi as trade and investment ties deepen.
