Yuan Hovers Near Three-Year Peak on Upbeat Macro Data

Yuan Hovers Near Three-Year Peak on Upbeat Macro Data

China's yuan inched up towards a three-year peak against the U.S. dollar on Wednesday, as strong macro data outweighed lower-than-expected central bank guidance and uncertainty about prospects for an end to the Iran war.

Yuan Strengthens

The USDCNY pair last traded up 0.05% at 6.7833, near its strongest level since February 2023. Its offshore counterpart CNH strengthened to as far as 6.7784, the highest in more than three years.

Industrial Profits Surge

China's industrial profits rose 24.7% in April from a year earlier, the fastest pace since November 2023. The data added to signs of an uneven recovery, with exports remaining a bright spot despite some loss of momentum in Q2.

Analyst Views

Analysts at Huatai Futures noted that the yuan is biased toward short-term strength but limited upside, likely maintaining a managed two-way fluctuation within the 6.76 to 6.82 range, given the dollar's renewed strength and the central bank's stabilization stance.

Central Bank and Geopolitical Risks

The PBOC set the midpoint at 6.8291 per dollar, 408 pips weaker than a Reuters estimate. Meanwhile, Iran accused the U.S. of violating a ceasefire by striking targets near the Strait of Hormuz, keeping market sentiment cautious.