The onshore renminbi strengthened past the 6.94 per dollar mark on February 3, reaching an intraday high of 6.9378 — the strongest level since May 12, 2023 — and appreciating about 135 basis points from the previous session’s close. Offshore yuan trading echoed the move, peaking at 6.93465, as the market shrugged off a brief two-day dollar rebound.
The move came amid a modest pullback in the US dollar index after two days of gains, a dynamic that Chinese brokers say has not yet exhausted downward momentum. Analysts from Industrial Bank noted that while short-term depreciation of the dollar may slow, there remains room for further downward adjustment in the first half of the year, particularly if US employment weakens or Federal Reserve rate-cut expectations move forward.
Beyond the dollar’s ebb, the yuan’s rise reflects a combination of factors: healthier capital flows into China, resilient external demand, and market participants pricing in a less hawkish US policy path. Authorities’ continued management of the exchange rate — a controlled, market-driven float with occasional intervention — also frames investor expectations; Beijing has repeatedly stressed stability while allowing orderly appreciation when pressures ease.
A firmer yuan has immediate, mixed implications for China’s economy. It lowers the cost of imported goods and eases inflationary pressures, benefitting consumers and domestic producers reliant on foreign inputs. Conversely, it tightens margins for exporters and could weigh on corporate earnings in dollar-denominated revenue streams, a sensitivity that Beijing watches closely as it balances growth support with financial stability.
For international markets, the yuan’s appreciation is a signal that the global dollar cycle may be shifting. A softer dollar makes dollar-denominated debt servicing easier for emerging markets and can lift commodity prices in local currency terms, but it also complicates monetary choices in economies where exchange-rate competitiveness matters. The next major inflection points will be incoming US employment data and any explicit guidance from the Fed, alongside China’s own macro releases and any discrete policy signals from Beijing.