Details
šĀ Currency turns upward: The yuan rose last week to 7.1019 per dollar ā its strongest level since November 2024. Since April, the currency has gained nearly 4%.
š¤Ā Trade peace helps: After the May deal between Washington and Beijing that cut tariffs by 115 percentage points, tensions have eased noticeably. Beijing had used export restrictions on rare earths as leverage.
š¦Ā Rates in sync: The interest rate gap between the U.S. and China is narrowing. While the Fed considers rate cuts, Chinese yields are rising ā prompting investors to shift from bonds into equities.
šļø Looser reins: The PBOC is currently tolerating a stronger currency. Instead of setting the reference rate artificially high, it is letting the market steer direction.
š¦Ā State banks at the helm: According to Bloomberg, Chinese banks are selling yuan in the spot market and hedging with swaps. This slows appreciation without stopping the trend entirely.
Big Picture
The yuanās recent climb shows how deeply geopolitics and monetary policy intertwine. Calmer trade relations and narrower rate differentials are supporting the currency. At the same time, the yuanās international rise remains limited: capital controls, lack of transparency, and political interference prevent it from challenging the dollar as the worldās reserve currency. For Beijing, the goal is less about dominance than about protection against U.S. financial sanctions.
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