The Chinese yuan has advanced to 6.91 per US dollar, marking its strongest position since May 2023. Investors noted this move as significant, extending the currency’s run to seven straight months of appreciation, following policy guidance from Chinese regulators and softer US dollar conditions.
Since the beginning of 2025, the yuan has climbed 5%, positioning it among the top-performing Asian currencies over recent months. According to figures since September, only two regional currencies have outpaced its gains. The surge has been supported by instructions from Chinese authorities for local banks to limit purchases of US Treasuries and reduce holdings if already highly exposed. These measures, combined with ongoing dollar weakness, have contributed to the yuan’s upward trajectory.
Market participants attributed this to routine pre-Lunar New Year dollar-to-yuan conversions by companies, as well as improved mood after US President Donald Trump and Chinese President Xi Jinping held what was described as a highly positive phone call. The conversation, which included nods toward strengthening bilateral ties and a possible presidential visit to China in April, lifted market sentiment.
Despite recent strength, analysts note that immediate further gains could be limited. Upcoming US dollar strength and a reduction in trading activity ahead of the Lunar New Year could moderate momentum.
Market participants are now focused on next week’s inflation data, which is expected to provide insight into China’s economic performance and direction for monetary policy.
