China's yuan remained stable against the US dollar on Friday, trading at 6.6907 per dollar in late-morning trade, little changed from Thursday's close. According to reports from Reuters, the currency earlier strengthened to 6.6897, marking its strongest level since January 2023. Before market opening, the People's Bank of China (PBOC) set the yuan's daily midpoint at 6.7220 per dollar, the strongest fixing since February 2023. The currency is on track for a third consecutive weekly gain, demonstrating sustained strength in China's external sector performance despite domestic economic concerns and rising global bond yields.
Strong export performance has supported the Chinese currency despite concerns over domestic economic growth and rising global bond yields. As reported by Reuters, resilient exports have helped underpin the yuan even as investors assess the outlook for the domestic economy and the direction of US monetary policy. The currency's stability reflects the continued strength of China's external sector, with exports maintaining their resilience despite higher tariffs, growing international trade pressures, rising export prices and a steadily appreciating yuan. Strong exports have been a key factor supporting the currency's performance throughout the recent trading period.
China's central bank governor indicated on Thursday that global economic imbalances could not be resolved through exchange rate adjustments alone, signalling Beijing's reluctance to allow a rapid appreciation of the yuan. According to Reuters, a Reuters poll of economists showed that China's economic growth was expected to accelerate modestly to 4.4% year-on-year in the July-September quarter, recovering from a more than three-year low. Market participants will closely watch China's third-quarter gross domestic product data, scheduled for release on Monday, which will provide crucial insights into the effectiveness of current economic policies.
The dollar index retreated from an 18-month low, with profit-taking and dovish remarks from a Federal Reserve official tempering its recent weakness, as noted by Nanhua Futures. US producer prices rose by the most in four-and-a-half years in September, though Nomura said the increase was insufficient to justify an interest rate hike by the Federal Reserve in October. Investors are expected to focus on Federal Reserve Chair Warsh's fireside chat during the International Monetary Fund and World Bank meetings in Bangkok for clues about US monetary policy outlook.
Despite domestic challenges and mounting international trade pressures, China's export performance has remained resilient. According to Pantheon Macroeconomics, Chinese exports had continued to advance despite higher tariffs, growing international pressure to rebalance trade, rising export prices and a steadily appreciating yuan. Strong exports have helped underpin the currency, although the outlook will depend on incoming economic data, global financial conditions and Beijing's approach to managing the yuan's appreciation. The export strength continues to provide crucial support for the yuan's stability amid broader economic uncertainties.
