FX.co ★ Yuan Remains Strong to Start the Year

The offshore yuan stabilized around 6.97 per dollar on Friday, marking its strongest position since May 2023, even as it resisted weaker guidance from the central bank due to ongoing dollar sales by exporters. The currency achieved its largest annual rise since 2020, appreciating by approximately 5% for 2025 and thus breaking a three-year losing trend. Despite efforts by the central bank to prevent an excessive appreciation of the yuan through more lenient guidance rates and warnings via state media, they have been unable to halt its upward momentum. Exporters continue to convert foreign currency into yuan, motivated by payment obligations and administrative needs, a trend likely persisting into early January. The yuan's strengthening is further supported by a resurgence of confidence in the Chinese economy, evidenced by December's manufacturing activity surpassing expectations. Additionally, a generally weaker dollar offered more support, as the Federal Reserve's stance on reducing interest rates became increasingly apparent.