Bloomberg's replica of the CFETS RMB Index reached 103.9 on Friday, a level last seen in April 2022. That puts the currency more than 5% higher for the year, with the yuan hovering near a multi-year peak against the dollar and above a one-year high versus the euro.
The People's Bank of China offered its most direct rejection yet of accusations that the yuan is artificially cheap, a debate that has intensified alongside China's large trade surplus. The central bank said Chinese trade has become much less sensitive to exchange rate moves, and earlier bouts of yuan strength left trade performance intact. A steady grind higher could also ease some diplomatic pressure. As Khoon Goh of Australia & New Zealand Banking Group put it, "This may suggest that the PBOC will be comfortable with further yuan strength even as they disagree on the extent of the currency's undervaluation."
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On Friday, the PBOC set the daily reference rate at its strongest since 2023, which defines the onshore yuan's trading band by 2% around that level. Goh expects traders to stay focused on those fixings, adding, "Pay attention to what they do, rather than what they say." The central bank's policy paper arrived as EU Trade Commissioner Maros Sefcovic held two days of talks in Beijing with Commerce Minister Wang Wentao; the paper made no reference to those talks. Strategists see the stance as favoring managed strength over a fast reset. Christopher Wong at Oversea-Chinese Banking Corp said, "Our sense is that Beijing is still pursuing a gradual and measured path of yuan appreciation, rather than a one-off adjustment."
The takeaway for anyone watching China-sensitive assets is simple: the signals are in the daily fixings. The PBOC set the strongest reference since 2023, and some strategists read this as not chasing a one-off jump, favoring gradual appreciation. If you have exposure tied to China, keep an eye on the direction and cadence of those fixings rather than the chatter around them.
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