Yuan’s Worst Week in Six Months Casts Spotlight on PBOC Fixing

The yuan is closing in on its biggest weekly drop in over six months as the dollar rebounds, sharpening the focus on the Chinese central bank’s policy signals.

China’s currency has depreciated 0.7% since July 25 in the offshore market to head for its largest weekly decline since end-January. Its onshore peer slid 0.6% during the period, putting it on track for its worst performance since early February.

The ’s revival has nudged the yuan out of the narrow trading range of 7.14-7.21 per dollar it’s been locked in for the past two months, offering investors a much-needed window to trade the currency. The People’s Bank of China set the yuan’s reference rate below 7.15 on Friday, a day after it renewed support for the currency as it the fixing’s gap versus estimates.

“Similar to other central banks in Asia, the PBOC may try to actively reduce any disorderly weakness in the CNY through its daily fix during this USD short-term bounce,” said Alex Loo , a macro strategist at TD Securities. “Investors may attempt to engage in USD/CNY shorts near 7.23 given the optimism of a US-China trade deal. We still see USD/CNY trading lower toward 7 by year-end.”

The Chinese currency slipped 0.1% to 7.2086 and 7.2161 in onshore and offshore trading, respectively on Friday. The losses were in line with a drop in regional currencies as the dollar strengthened after President Donald Trump announced a slew of , including a 10% global minimum.

One-month implied volatility in the dollar-offshore yuan pair rose 8 basis points to 2.94% on Friday after closing at the lowest level since March 2024 the previous day.

“The Chinese yuan has weakened past the 7.20 level on the back of the resurgence in the USD,” said Khoon Goh , head of Asia research at Australia & New Zealand Banking Group. “But the authorities, in setting the fix just shy of the 7.15 level today, are signaling that they do not want the yuan to weaken too far.”