FX.co ★ Offshore Yuan Remains Firm

The offshore yuan strengthened to around 6.77 per dollar on Wednesday as investors evaluated the latest inflation figures and their implications for China’s economic outlook. Consumer prices rose 1.2% year-on-year in May 2026, slightly below the 1.3% consensus forecast, underscoring how subdued household demand continues to offset inflationary pressures from higher global energy prices linked to the Middle East conflict. At the same time, producer prices accelerated to 3.9% from 2.8% in April, marking their highest level since July 2022. This increase extended the rebound from China’s prolonged period of producer-price deflation and was driven largely by rising commodity and energy costs. Although China has partly cushioned the energy shock through the use of strategic oil reserves and its expanding renewable energy capacity, sustained cost pressures risk squeezing corporate profit margins. A broader pass-through of these costs to consumer prices could also weigh on household spending, though weak domestic demand has so far limited such spillovers.