FX.co ★ Yuan Remains Strong Amid Year-End Flows

The offshore yuan was trading close to the 7 per dollar mark, reaching its highest level in fifteen months, as the year-end demand trend persisted and the US dollar weakened. Exporters are typically known to convert more foreign currency into yuan at the end of the year to settle payments and meet administrative needs, a pattern expected to continue through January as preparations for the Lunar New Year take place. Moreover, the US dollar was under pressure with investors looking forward to the Federal Reserve's December meeting minutes for insights into future interest rate trends. In response to the yuan's swift rise, Chinese state media issued alerts against placing one-sided bets, highlighting official concerns about the rapid rate of gains. The People's Bank of China has also committed to mitigating "overshooting risks" and has been setting the daily fixing below market expectations for the last fortnight. The yuan has experienced a growth of more than 4% this year, marking its most significant annual increase since 2020, and surpassed the 7 per dollar threshold in offshore markets last week for the first time in over a year.