China's yuan hovers near 3-1/2-year peak, set for 8th straight weekly rise

SHANGHAI: China's yuan edged close to its 3-1/2-year high against a weakening US dollar on Friday, as investors turned their attention to the upcoming Jackson Hole symposium for potential policy cues from the Federal Reserve. The dollar faced a challenging week and was expected to face a loss, with market participants viewing the US Treasury's bond buyback plan as a short-term measure, raising doubts about the central bank's interventionist stance.

In the spot market, the onshore yuan traded within a narrow band in early deals and closed at 6.7221 per dollar, up 0.06% as of 0329 GMT. It was in close proximity to its February 2023 peak of 6.7203, marking the highest level since then. A successful close at the midday level would see the yuan rise by 0.3% against the dollar, marking its eighth consecutive weekly gain.

The offshore yuan last traded at 6.7224 yuan per dollar, a 0.05% increase from Asian trade. Prior to the market open, the People's Bank of China (PBOC) set the midpoint rate at 6.7817 per dollar, which was 555 pips below a Reuters estimate of 6.7262. The spot yuan is permitted to trade 2% either side of the fixed midpoint daily.

The central bank has been issuing weaker-than-anticipated midpoint rates since November 2025, prompting market participants to see this as an effort to curb excessive strength and maintain market stability. "This aligns with a preference for steady appreciation rather than a one-way rise," said Christopher Wong, FX strategist at OCBC Bank.

"Softening USD dynamics and exporter conversions should continue to support the RMB, but the fixing behavior hints policymakers are unlikely to permit an overly rapid move." Traders added that they would closely monitor Fed Chairman Kevin Warsh's speech at the Jackson Hole symposium next week for insights into his strategy to combat persistent inflation.