China's central bank, the People's Bank of China (PBOC), set its daily guidance rate for the yuan weaker for the fourth trading session in a row. This move signals the central bank's adaptability in managing its currency in response to the US dollar's continued advance. The daily reference rate was set at 6.8195 per dollar on Wednesday, a weakening from 6.8171 the day prior. This marks the longest streak of weaker fixings since April 2025, according to Bloomberg data.
The PBOC's daily fix plays a significant role in guiding the yuan's onshore trading range, which is typically allowed to fluctuate within 2% stronger or weaker than the announced central parity rate. While the fix is theoretically determined by market makers, research suggests it significantly influences the currency's daily direction, effectively narrowing its true trading band. This demonstrates the central bank's substantial day-to-day influence over the yuan.
The weakening of the yuan fix comes as the US dollar has reached a 13-month high against a basket of major currencies. This dollar strength is attributed to investors seeking safe haven amid a tech stock sell-off and increasing expectations for Federal Reserve interest rate hikes. Markets are currently pricing in a 37% chance of a 25-basis-point hike in July and a 70% chance by September. Despite the weakening fix, some traders in early June 2026 were betting on a stronger yuan in the coming year, driven by increased global usage and an attractive valuation, with expectations for further gains being the most bullish since 2011.
