China's Yuan Hits Three-Month Highs Amid Dollar Weakness and Stock Market Gains

China's yuan strengthened to fresh three-month highs against the U.S. dollar on Monday, driven by strong domestic equity market performance and broader dollar weakness.

Policymakers are expected to prioritize currency stability ahead of next week's National People's Congress (NPC) meeting, analysts at Barclays noted. They added that inflation targets and fiscal support measures will be key topics to watch.

By midday, the onshore yuan rose 0.3% to 7.2313 per dollar, its highest level since November 29, 2024. Meanwhile, the offshore yuan gained 0.36% in Asian trade, reaching 7.2304 per dollar.

The Chinese currency has now strengthened for four consecutive days, supported by an AI-driven rebound in domestic stock markets and the recent decline in the greenback. This momentum has helped the yuan gain 0.3% against the dollar this month and 0.9% year-to-date, recovering from multi-year lows of 7.33 in January.

Before the market opened, the People's Bank of China set the midpoint rate at 7.1717 per dollar. Since mid-November, the central bank has consistently set its official guidance stronger than market expectations, a move analysts interpret as an effort to curb the yuan's depreciation.

In the bond market, Chinese 10-year government bond yields rose 3.6 basis points to 1.78%, while the yield on comparable U.S. Treasury bonds fell to 4.4%.

The U.S. dollar index, which measures the greenback against a basket of six major currencies, declined 0.3% to 106.16—its lowest level since December—following a Wall Street sell-off and weaker economic data.

Key Onshore vs. Offshore Levels:

• Overnight dollar/yuan swap: Onshore -8.70 pips | Offshore -8.70 pips.
• Three-month SHIBOR: 1.8% | Three-month CNH HIBOR: 2.5%

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