Yuan Rises to Over Three-Year High as Dollar Weakens After Fed Decision
Claire Weston
The dollar posted its largest two-week drop after the Fed held rates on July 29; onshore yuan surged to 6.7550 — the strongest since February 2023 — as the PBOC guided the fixing below 6.80, signaling comfort with the current level.
The Fed held — why did the dollar fall?
The Fed kept rates unchanged on July 29. The Bloomberg Dollar Spot Index posted its biggest single-day drop in two weeks.
This means → the market's prior bet on a rate hike collapsed; dollar longs unwound and capital flowed out.
The yuan rallied in tandem: onshore hit 6.7550, offshore touched 6.7523 — both the strongest since February 2023.
How did this yuan rally take shape?
In June, strong U.S. data and bets that Fed Chair Kevin Warsh would turn hawkish lifted the dollar; the yuan pulled back under pressure.
By July the dollar rally faded and the yuan resumed its climb. The PBOC guided the daily fixing below 6.80 — the first time since 2023.
In plain terms = June was the dollar squeezing the yuan; in July the dollar eased first and the yuan snapped back.
Is the PBOC pushing appreciation or just allowing it?
On July 31 the PBOC set the fixing at 6.7892, a tiny move from the prior day's 6.7899 — permitting the direction but keeping the pace measured.
The central bank has signaled it is comfortable with the current level and expects two-way fluctuation.
This means → the PBOC is not driving the yuan higher; it is simply no longer blocking the market's upward move — "allowing," not "pushing."
What determines the next move?
Alpine Macro strategist Yan Wang expects the yuan to grind higher, supported by strong Chinese exports and protectionist pressure from trading partners.
This reflects a deeper logic: the more partners push back, the more a modest yuan rise eases friction — appreciation itself becomes a diplomatic tool.
The Fed's next meeting is in September; expectations for a hike have cooled significantly. The dollar's near-term path remains the key variable for the yuan.
Content is for reference only, not financial advice.