The yuan advanced to a four-year high against a basket of its trading partners’ currencies after the People’s Bank of China rejected claims of undervaluation and defended its exchange-rate management.
The Bloomberg replica of the CFETS RMB Index rose to 103.9 on Friday, its highest level since April 2022, bringing its year-to-date gain to over 5%. The Chinese currency also sits near a multi-year peak versus the dollar and more than a one-year high against the euro.
The PBOC issued its clearest rebuttal yet against claims that the yuan is artificially undervalued, accusations that have intensified as China’s surging trade surplus draws fresh international scrutiny. The central bank noted that Chinese trade has become significantly less sensitive to currency swings, suggesting past rounds of appreciation did not disrupt trade performance. Still, the currency’s steady appreciation may help Beijing defuse some of that diplomatic tension.
“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,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group.
The PBOC set the yuan’s reference rate at the strongest level since 2023 on Friday. The so-called fixing defines onshore yuan’s trading range by 2% around it.
Goh expects the market to remain focused on daily fixings. “Pay attention to what they do, rather than what they say,” he said.
The central bank’s action followed a detailed policy document released Thursday, in which the PBOC rejected using currency appreciation to address global imbalances and issued a rare rebuttal against undervaluation claims. The timing coincides with EU Trade Commissioner Maros Sefcovic’s two-day negotiations in Beijing with Chinese Commerce Minister Wang Wentao, though the document made no direct mention of the talks.
Some strategists view the policy stance as a signal that Beijing favors managed strength over rapid adjustment.
“Our sense is that Beijing is still pursuing a gradual and measured path of yuan appreciation, rather than a one-off adjustment,” said Christopher Wong, strategist at Oversea-Chinese Banking Corp. “The authorities appear comfortable with a stronger currency but remain mindful of the pace of gain.”