FX.co ★ Offshore Yuan Slips as Dollar Advances

The offshore yuan fell to approximately 7.18 per dollar on Monday, undoing gains from the previous session, as escalating geopolitical tensions fueled renewed safe-haven demand, strengthening the US dollar. The United States conducted airstrikes on three Iranian nuclear sites, indicating its direct involvement in the Israel-Iran conflict despite former commitments by President Trump to avoid new military engagements. This development represents a significant escalation, heightening fears of broader regional conflict and causing a spike in oil prices. The US has urged China to prevent Iran from blocking the Strait of Hormuz in response. Approximately 20% of the world's oil passes through this critical passage, a vital channel for China, which imports 45% of its oil through it. Any disruption poses a risk of inflation and increased downward pressure on the yuan. However, the yuan received some support as China expanded its cross-border yuan payment system, incorporating six financial institutions from Africa, the Gulf, and Central Asia, to enhance the yuan's global presence.