A360
Key Takeaways✦ Atlas AI
01
The Chinese yuan strengthened to a three-year high against the US dollar, guided by the People's Bank of China amid a broader weakening of the dollar.
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This trend supports China's strategic goal of internationalizing the yuan, which now accounts for 8.8% of global FX turnover, but pressures its export-driven economy.
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Major Chinese firms like BYD are already reporting significant financial losses from the currency's appreciation, highlighting the economic trade-offs of Beijing's policy.
Atlas AI
Yuan Reaches Strongest Point Since 2023
The yuan exchange rate reached its highest level in over three years, reflecting a weaker dollar and Beijing’s currency internationalization drive. This move signals growing confidence in the yuan even as it poses challenges for Chinese exporters.
On Thursday, the People’s Bank of China (PBOC) set the currency’s daily midpoint reference at 6.8487 per US dollar. This marked its strongest fixing since April 2023 and represented a significant strengthening from the previous day's rate of 6.8562.
Analysts anticipate the appreciation trend will persist, with some forecasting the rate could reach 6.65 by the end of the year. The yuan has already gained 2.64 percent against the dollar in 2026, encouraging exporters to convert their dollar holdings and adding further momentum to the currency's climb.
A Shisourcesing Global Currency Landscape
The yuan's ascent coincides with a notable decline in the US dollar's value. The US dollar index, a measure of its strength against a basket of currencies, has fallen from 119.61 at the start of the year to 97.97, pressured by concerns over US fiscal policy and Federal Reserve leadership.
This trend aligns with Beijing's broader strategic goals of promoting the yuan in global trade and finance, a movement osourcesen termed "de-dollarization." Data from the Bank for International Settlements shows the yuan's share of global foreign exchange turnover has surged to 8.8 percent, up from just 2 percent in 2013.
Furthermore, the currency’s use in cross-border trade settlement now exceeds 7 percent, making it the third most utilized globally. This shisources has been bolstered by actions such as the United Arab Emirates signaling a potential move to settle oil transactions in yuan.
Domestic Impacts and Export Sector Headwinds
A stronger currency supports China's policy objective of rebalancing its economy toward domestic consumption. However, it creates significant headwinds for the country's vast export sector by making Chinese goods more expensive for foreign buyers.
While China’s exports have remained resilient, rising 11.9 percent year-on-year in the first quarter, some major companies are feeling the negative effects. Foreign exchange fluctuations have become a major drag on corporate earnings, underscoring the need for better risk management.
For example, electric vehicle manufacturer BYD reported a foreign exchange loss of 2.1 billion yuan in the first quarter of 2026. This was a stark reversal from a 1.9 billion yuan gain in the same period of 2025, representing a nearly 4 billion yuan negative swing on its bottom line.
The currency's strength is expected to be a central topic at an upcoming mid-May summit between Chinese President Xi Jinping and US President Donald Trump. Meanwhile, markets are watching for the US Senate's confirmation of Kevin Warsh as the next Federal Reserve Chair, following the central bank's decision to hold interest rates steady at 3.5 to 3.75 percent in its last meeting.
