China’s yuan hits four-year high as PBOC tempers gains

China’s yuan reached its strongest level against the US dollar in more than four years on Thursday, October 22, as broad dollar weakness supported the currency despite a weaker-than-expected daily fixing by China’s central bank. Economic Times Markets, citing Reuters, reported that the onshore yuan touched 6.6740 per dollar, its highest level since June 2022.

The onshore currency subsequently traded at 6.6749 per dollar at 0238 GMT. Offshore, the yuan stood at 6.6744 per dollar, up about 0.01% in Asian trading. These figures represent the report’s market snapshot, not live exchange rates.

PBOC signals restraint on the pace of appreciation

Before trading opened, the People’s Bank of China set its daily midpoint at 6.7195 yuan per dollar. That was 439 pips weaker than the Reuters estimate of 6.6756—the largest deviation towards a weaker yuan since September 23. China permits its onshore currency to trade within 2% on either side of the midpoint.

The central bank has progressively strengthened its daily guidance this year, but its fixings have remained weaker than market expectations. Traders and analysts interpreted that combination as an effort to contain the speed of appreciation without reversing the currency’s direction.

Maybank analysts said the fixing indicated resistance to the pace of the dollar’s decline against the yuan. They nevertheless viewed the limited distance between the market rate and the official midpoint as a sign that authorities were allowing the broader trend to continue.

Trading was subdued despite the multiyear high. Onshore spot rates moved within roughly 20 pips, while turnover fell to around $10.6 billion.

Export conversions and US rates shape the outlook

Currency traders attributed support for the yuan this year to strong exports and sustained conversion of foreign-exchange receipts. China Merchants Bank analysts said continued conversion of export earnings into yuan could help the currency hold steady or strengthen further, even if the US dollar index remained resilient.

The interest-rate backdrop remained a counterweight. The report described the China–US yield differential as close to its widest on record, keeping attention on the Federal Reserve’s next policy decisions. Investors were also reassessing the US rate outlook amid renewed concern about inflation driven by oil prices.

The Federal Reserve, Bank of Japan and European Central Bank were widely expected to leave rates unchanged at meetings the following week while retaining a hawkish stance. Traders assigned only a small probability to a Fed increase at that meeting, with the next rise expected in December, according to the report. Those expectations are market pricing, not announced policy decisions.