Yuan Hits 9-Year High vs Dollar, Slides vs Euro & Yen

The Chinese yuan surged to a nine-year high against the US dollar, trading at 7.118 per dollar on Monday. Meanwhile, it has depreciated over 10% against the euro, 5% against the pound, and 3% against the yen this year. This exchange rate divergence reflects Beijing’s strategy to support export competitiveness outside the US as demand from Europe and Asia grows. The People’s Bank of China has held rates steady despite expectations that the Federal Reserve will cut rates, widening the yield gap between US and Chinese debt. Capital inflows and state-led buying have driven the CSI 300 Index up 43% since September 2024. Avoiding further stimulus helps prevent a stock bubble. Analysts at OCBC and Goldman Sachs predict the yuan could reach between 7.08 and 7.0 per dollar by year-end. However, a weaker real effective yuan has drawn criticism from trading partners. India and Mexico have threatened trade measures as the cheaper yuan fuels a growing surplus in non-dollar markets. The policy and its global backlash will shape currency and trade dynamics in the coming months.