Yuan Extends Advance After PBOC Sets Another Stronger Fixing

The offshore yuan reached its strongest level in nearly three years versus the dollar after China signaled tolerance for a managed appreciation via the daily fix.

The People’s Bank of China set the yuan’s daily reference rate at 6.9228 per dollar on Thursday, strengthening it for a second session, following an accelerated gain overnight . Underscoring the momentum toward appreciation, the offshore yuan advanced as much as 0.3% to 6.8357 per dollar, the strongest level since April 2023.

The currency’s gains are backed by robust foreign exchange , an improving relationship and broad weakness in the greenback. The fix indicated Chinese officials may be warming to a modest yuan advance this year, which would aid capital inflows, reduce trade frictions and help the long-term ambition of internationalization.

“The key message is that the authorities are not attempting to halt the appreciation, but rather ensure that the appreciation pace is at a trot and not at full gallop,” said Khoon Goh , head of Asia research at Australia & New Zealand Banking Group.

The market reaction also indicates yuan bulls remain at ease, despite a wide gap between the fixing and market estimate — which suggests the PBOC prefers a slower appreciation. Thursday’s fixing was 610 pips weaker than the average forecast at 6.8618 by traders and analysts in a Bloomberg survey, a record gap on the weakening bias side.

Bloomberg’s survey typically reflects market estimates of where the PBOC’s fixing should be given overnight moves, based on its methodology, but excluding the so-called counter-cyclical factor. As a result, any divergence from the actual fixing can be interpreted as the extent of the PBOC’s daily support for, or restraint on, the managed currency.