China Moves to Temper Yuan’s Rise Against the Dollar

China’s central bank has taken a measured step to slow the yuan’s recent advance against the US dollar, setting the daily reference rate at a level weaker than market expectations as authorities seek to balance currency strength with export competitiveness.

The People’s Bank of China (PBOC) set the yuan’s daily fixing at 7.0014 per dollar on Wednesday, below all nine forecasts in a Bloomberg survey of analysts and traders. The move brings the fixing close to the largest downward adjustment for the onshore yuan since 2023.

The decision signals Beijing’s intent to manage the pace of the yuan’s appreciation rather than stop it outright, as the US dollar weakens globally. The PBOC has allowed the currency to rise gradually, reflecting softer dollar conditions and renewed capital inflows, while guarding against excessive gains that could weigh on Chinese exporters.

Since early December, the central bank has consistently set the daily fixing below market estimates, underscoring its cautious approach amid improving sentiment toward Chinese assets.

“The message, if intentional, is that authorities want to prevent a sharp rise as we enter a seasonally strong period for the yuan,” said Khoon Goh, Head of Asia Research at Australia & New Zealand Banking Group. “That said, this is about controlling the speed of appreciation, not trying to reverse it.”

Fresh momentum for the yuan emerged this week as the US dollar came under broad selling pressure. Market confidence in US assets was shaken by President Donald Trump’s renewed tariff threats against European allies and controversy surrounding his push to acquire Greenland, adding to geopolitical uncertainty.

The yuan has already crossed the closely watched 7-per-dollar threshold in both onshore and offshore trading since December. Over the past month, it has gained more than 1% against the dollar, outperforming most Asian peers.

China’s record $1.2 trillion trade surplus, rising capital repatriation, and growing optimism around domestic equities continue to underpin expectations for further yuan gains, despite near-term volatility.

In Asian trading on Wednesday, the onshore yuan slipped 0.1% to 6.9650 per dollar, with offshore trading showing similarly modest declines. The average market estimate for the fixing in Bloomberg’s survey stood at 6.9601, highlighting the gap between investor expectations and the central bank’s guidance.

The fixing mechanism, which reflects overnight market moves while excluding the so-called counter-cyclical factor, is widely seen as a key signal of the PBOC’s daily stance. Deviations from expectations are closely monitored as an indicator of how strongly policymakers are supporting, or restraining, the managed currency.