China Boosts Yuan to 9-Month High as Federal Reserve Hints at Rate Cuts
Yuan Strengthens Against US Dollar
The People’s Bank of China (PBoC) has set the yuan’s daily reference rate at its strongest level in more than nine months, giving the Chinese currency a notable boost against the US dollar. On Monday, the central bank fixed the yuan midpoint rate—also known as the daily fixing—at 7.1161 per dollar, its firmest level since early November.
This adjustment from the previous rate of 7.1321 also marked the largest upward shift since January, reflecting Beijing’s move to stabilize its currency as global market sentiment shifts.
Fed’s Dovish Pivot Fuels Market Expectations
The timing of the yuan’s rally comes just days after Jerome Powell, Chair of the Federal Reserve, signaled a softer stance on monetary policy at the Jackson Hole economic symposium. Powell suggested that the Fed may consider an interest rate cut in September, a major departure from his earlier resistance to easing.
This dovish pivot by the Federal Reserve has fueled expectations of a broader cycle of rate cuts, pressuring the US dollar index, which dropped to a four-week low after Powell’s remarks.
Offshore Yuan Climbs as Dollar Weakens
Following Monday’s stronger fixing, the offshore yuan rose to 7.158 per dollar by midday, reaching its highest point since late July. The currency had already gained momentum last Friday, touching 7.167 per dollar, as investors reacted to the weakening greenback.
Currency traders noted that the combination of a softer dollar and a stronger yuan fixing underscores a shift in forex market dynamics, where China seeks to reinforce stability while the US contemplates policy easing.
Market Analysts: September Rate Cut “Almost Certain”
According to Raymond Yeung, Chief Economist for Greater China at ANZ, markets have now “almost locked in” a Federal Reserve September rate cut. Investors are closely watching not only the likelihood of the cut but also the scale and pace of Fed easing throughout the year.
This expectation has significant implications for global currency markets, as rate reductions in the US typically weaken the US dollar while strengthening emerging market currencies such as the Chinese yuan.
The yuan’s sharp appreciation highlights the ongoing China–US currency dynamic, where central bank policy decisions in both nations directly influence forex markets, trade flows, and investor sentiment.
With the People’s Bank of China (PBoC) actively guiding the yuan vs dollar exchange rate higher, and the Federal Reserve preparing to ease policy, global markets may see renewed volatility in the months ahead.
China’s yuan hits a 9-month high against the US dollar as the Federal Reserve signals possible rate cuts in September, reshaping global forex markets.
