The Chinese yuan traded close to a three-and-a-half-year high against the U.S. dollar on Tuesday.
The currency received support from a stronger-than-expected fixing by the People’s Bank of China. Investors were also focused on an upcoming meeting between Chinese President Xi Jinping and U.S. President Donald Trump.
PBOC Sets Strongest Yuan Fixing Since 2023
The People’s Bank of China set the yuan’s daily midpoint at 6.7459 per dollar.
That was the strongest fixing since February 2023 and 28 pips firmer than Monday’s reference rate.
The stronger fixing reinforced expectations that Chinese authorities are becoming more comfortable with a gradual appreciation of the yuan.
Chinese Yuan Trades Near Multi-Year Highs
The onshore yuan strengthened sharply on Monday.
USD/CNY fell as low as 6.6947, its lowest level since January 2023.
The offshore yuan also gained ground, with USD/CNH dropping to 6.6908.
Both currency pairs were largely unchanged on Tuesday but remained close to their multi-year lows.
A decline in USD/CNY or USD/CNH indicates that the Chinese yuan is strengthening against the U.S. dollar.
PBOC Allows Faster Yuan Appreciation
The Chinese yuan has gained strength as the PBOC allows its daily fixing to appreciate at a faster pace.
This has helped narrow the gap between the central bank’s official reference rate and broader market expectations.
The shift may indicate that policymakers are becoming more tolerant of gradual yuan appreciation.
Currency markets are watching closely to see whether the PBOC continues this approach in the coming sessions.
Trump-Xi Summit Comes Into Focus
The yuan’s move comes ahead of a closely watched meeting between President Xi Jinping and President Donald Trump.
The two leaders are expected to meet between September 23 and September 25.
Trade relations are likely to be a major part of the discussions.
Artificial intelligence, global supply chains and tensions in the Middle East are also expected to feature on the agenda.
The outcome of the Trump-Xi meeting could therefore have important implications for the Chinese yuan, global trade and broader financial markets.
For now, the combination of a stronger PBOC fixing and expectations surrounding the summit is helping keep the yuan near its strongest levels in more than three years.
