The "offshore yuan" strengthened past the reference level for the first time in two months, with the outcome of the Fed meeting closely watched.

The offshore yuan strengthened above its benchmark level for the first time in two months, reflecting investor optimism about the currency. However, the market still faces significant risks from the Federal Reserve meeting.

On September 17, 2568, at 13.08:XNUMX a.m., Bloomberg News reported that The offshore yuan, which is more sensitive to market trends than the onshore yuan due to its less regulation, strengthened above the People's Bank of China's (PBOC) fixing rate on Wednesday (Sept 17). This is the first time since July that the offshore yuan has appreciated against the domestic yuan on most days throughout September, reversing the trend from July and August.

While some investors are starting to become more positive about the yuan, three key risks remain that could determine its direction: Wednesday's Federal Reserve meeting, which could skew the dollar and directly impact the yuan; Friday's talks between President Xi Jinping and President Donald Trump, which could have currency implications; and a final agreement on TikTok's US operations.

Some analysts are watching the 7.1 yuan per dollar daily reference rate for official intentions, suggesting that the National Day holiday in October could be an opportunity for Chinese authorities to adjust the yuan's exchange rate to trade above the fixing level.

Khoon Goh, Head of Asia Research at ANZ Singapore He said that the fixing rate, which is close to the offshore yuan, coupled with the weakening dollar, presents a good time to further strengthen the yuan. He expects the dollar/yuan exchange rate to decline, with an estimated end-of-year rate of 7.05 and possibly below 7.00 next year.

The offshore yuan has strengthened 0.3% this week, hitting a high of 7.1004 per dollar on Wednesday, with the fixing rate at 7.1013. This puts the offshore yuan at its largest premium to the domestic yuan since late August.

For the domestic yuan, it is set to move within a range of no more than 2% from the daily fixing rate.

Last month, the People's Bank of China (PBOC) tried to signal a stronger yuan by imposing a fixing order after strong export figures and trade talks with the United States. A surging Chinese stock market and confidence that Beijing could rescue the economy from deflation with a "price war" also contributed to the positive trend.

Frances Cheung, Head of Foreign Exchange and Interest Rate Strategy at Oversea-Chinese Banking Corp. In Singapore, it states that “We expect the dollar/yuan exchange rate to move to 7.08 by year-end, and possibly lower.” He added that the yuan's fixing reflected that Chinese authorities were still allowing the currency to gradually appreciate, while the broader dollar trend remained weak.

refer : bloomberg.com

Read news related to All China economic situations can be found here.