China’s yuan rose to its strongest levels in 32 months after the central bank continued a measured approach to guiding the currency stronger by raising its official midpoint. The People’s Bank of China (PBOC) set the midpoint at 6.9843 per dollar before markets opened, a level not seen since May 17, 2023, while nevertheless leaving the midpoint notably weaker than market expectations.
The midpoint was 551 pips weaker than a Reuters estimate of 6.9292, marking the largest weak-side deviation from market forecasts since such data first became available in 2022. The PBOC’s pattern of careful upward guidance was reflected in spot trading: the onshore yuan climbed to a session high of 6.9539 per dollar, its strongest since May 16, 2023, before trading at 6.9558 at 0350 GMT. The offshore yuan fetched 6.9522 per dollar at the same time.
The currency has strengthened 0.5% against the dollar so far this year, following a 4.5% increase in 2025, which was the largest annual appreciation since 2020. Market participants cited a softer dollar and increased corporate demand for yuan as immediate support for the recent gains.
Corporate conversions typically intensify ahead of the Lunar New Year holiday, when exporters often settle foreign exchange receipts to cover various payments including employee bonuses. This year’s Lunar New Year falls in mid-February, and traders and analysts noted that such forex conversions tend to provide near-term support for the yuan, but that this effect may begin to fade this week.
Analysts at Barclays commented on the central bank’s approach, saying: "We expect growing resistance from China’s authorities to yuan appreciation pressures. We also expect more measures to ease upward pressure on the yuan in the weeks and months ahead and maintain our view of a turnaround over the medium term." The Barclays note frames the current dynamic as one where authorities may act to moderate further rapid appreciation.
In wider markets, other Asian currencies also strengthened after the Japanese yen jumped to a more than two-month high amid rising speculation about potential coordinated intervention by authorities in the United States and Japan. Tokyo’s top currency diplomat left the possibility of intervention wide open, leaving markets uncertain about next steps.
At 0350 GMT, key intraday levels were: spot yuan trading at 6.9558 (up 0.1% on the day, up 0.5% year-to-date), a high of 6.9539 and a low of 6.9588. Offshore yuan was 6.9522, up 0.04% on the day and 0.3% year-to-date, with a high of 6.9418 and a low of 6.9548.
The combination of a modestly weaker midpoint setting by the PBOC relative to market estimates, seasonal corporate FX flows, and a softer dollar underpinned the recent moves. Traders and analysts will be watching whether near-term conversion flows wane after the pre-holiday peak and how authorities respond if appreciation pressures persist.