Chinese yuan hits strongest level against dollar since April 2023

The Chinese yuan rose to its strongest level against the US dollar since April 2023, supported by improving sentiment across Asian economies amid expectations of a possible agreement between the United States and Iran.

The People’s Bank of China set the daily midpoint for the yuan-dollar parity at 6.8487, while the Chinese currency climbed to its highest level against the dollar in more than three years.

Falling oil prices, driven by expectations that a potential deal could end the conflict in the Middle East and restore crude shipments through the Strait of Hormuz, helped strengthen sentiment in Asian economies, particularly in China, which remains heavily reliant on the region for energy imports.

The weakening US dollar index since the start of the year has also supported the yuan. The Chinese currency has gained 2.64% against the dollar so far this year.

The yuan had weakened against the dollar beginning in March 2022 after the Federal Reserve launched an aggressive cycle of interest rate hikes following the COVID-19 pandemic.

Analysts said the yuan’s appreciation could continue in the coming months alongside a weaker dollar index, with forecasts suggesting the yuan-dollar parity may fall to 6.65 by the end of the year.