China’s yuan strengthened to more than a 3½-year high against the U.S. dollar on Monday as the People’s Bank of China eased its resistance to currency appreciation ahead of this week’s U.S.-China leaders’ summit.
The onshore yuan reached 6.6950 per dollar, its strongest level since January 16, 2023, before finishing the domestic session at 6.6955.
The offshore yuan traded around 6.6946 during Asian trading.
The move followed a shift in the central bank’s daily currency guidance.
The PBOC set Monday’s midpoint at 6.7487 per dollar, its strongest fixing since February 2023.
For much of the past year, the central bank had set official guidance weaker than market expectations, which traders and analysts interpreted as an effort to restrain appreciation.
That gap has narrowed during September, suggesting policymakers have become more comfortable allowing the currency to strengthen.
The timing is notable.
U.S. President Donald Trump and Chinese President Xi Jinping are expected to meet from September 23 to 25 following preparatory discussions between U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng.
Trade, artificial intelligence, supply chains and Middle East tensions are expected to feature in the discussions.
A stronger and relatively stable yuan can reduce currency friction during trade negotiations, but investors should be cautious about interpreting the move as the start of an unrestricted appreciation cycle.
China continues to face weak domestic fundamentals and a substantial interest-rate differential with the United States.
For currency markets, the test will come after the summit: whether the PBOC continues allowing stronger fixings once the immediate diplomatic event has passed.
