FX.co ★ Offshore Yuan Falls Amid Middle East Tensions

The offshore yuan weakened past 6.87 per dollar on Monday, extending losses from the previous session, as a stronger US dollar and escalating conflict in the Middle East weighed on sentiment. Over the weekend, the US and Israel conducted coordinated strikes on Iran, killing the country’s Supreme Leader, Ayatollah Ali Khamenei. Iran responded with attacks on US assets in neighboring states, unnerving global markets and effectively shutting the Strait of Hormuz. As the world’s largest crude importer, China now faces mounting inflation and growth pressures from surging oil prices. In response to the crisis, Beijing has called for an immediate ceasefire and urged its citizens in the region to evacuate.

At the same time, markets are closely watching China’s annual Two Sessions, held from March 4–11, where authorities are expected to set key economic targets and unveil the 15th Five-Year Plan for 2026–2030. Separately, the People’s Bank of China has officially reduced the foreign-exchange risk reserve ratio on forward sales from 20% to 0%, effective today, in a move aimed at countering the yuan’s recent rapid appreciation and stabilizing capital flows.