FX.co ★ Offshore Yuan Falls, Still Set for Weekly Gains

The offshore yuan weakened to 6.89 per dollar on Friday, erasing the previous session’s gains as a stronger US dollar put pressure on the currency. The greenback advanced after major central banks warned that the ongoing conflict in the Middle East could fuel inflation, leading traders to scale back expectations of a Federal Reserve rate cut this year.

In China, the central bank left its key lending benchmarks unchanged for a tenth consecutive month in March 2026, holding the one-year loan prime rate at 3% and the five-year rate at 3.5%. This cautious approach reflects heightened uncertainty, including a surge in oil prices driven by Middle East tensions. At the same time, Beijing’s lower 2026 growth target of 4.5%–5% has eased pressure for additional monetary stimulus.

Analysts noted that higher oil prices could help pull China out of its prolonged deflationary spell. However, they warned that in the absence of stronger demand or progress in reducing industrial overcapacity, manufacturers may simply face higher input costs rather than improved pricing power. Despite Friday’s pullback, the yuan remains on track to post weekly gains.