China’s yuan strengthened to its highest level in more than three and a half years against the US dollar on September 21, 2026, as the country’s central bank appeared to ease its resistance to currency appreciation ahead of President Xi Jinping’s talks with US President Donald Trump.
The onshore yuan reached 6.6950 per US dollar, its strongest level since January 16, 2023, while the offshore yuan traded around 6.6946. The move came as markets focused on the September 23-25 Trump-Xi summit in Washington.
PBOC signals greater tolerance for a stronger yuan
The People’s Bank of China, or PBOC, sets a daily midpoint for the yuan around which the onshore currency is allowed to trade within a 2% band.
On September 21, the central bank set the midpoint at 6.7487 per dollar, the strongest official reference rate since February 2023. Reuters reported that the PBOC had increasingly allowed the midpoint to move stronger in September after spending much of the previous year setting guidance rates that were weaker than market expectations.
The shift represented a change in the central bank’s recent approach to managing the currency.
For much of the preceding year, the PBOC had used its daily fixing to limit the pace of yuan appreciation. The September changes narrowed the gap between the official fixing and market expectations.
Currency move comes before US-China summit
The yuan’s rise occurred immediately before the meeting between Xi and Trump.
US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng had completed preparatory discussions in New York on September 20. Those talks were intended to prepare the ground for the leaders’ meeting later in the week.
Trade, artificial intelligence, supply chains and geopolitical issues were among the subjects expected to feature in the discussions.
The timing of the currency move attracted attention because exchange-rate policy has historically been a sensitive part of US-China economic relations.
A stronger yuan can reduce the price advantage enjoyed by Chinese exporters when measured in US dollars, although exchange rates are only one factor affecting trade competitiveness.
Analysts caution against reading too much into the move
The yuan’s appreciation did not necessarily mean that China had begun a long-term policy of allowing the currency to strengthen rapidly.
Goldman Sachs analysts said the summit could support a stable trading relationship and allow gradual yuan appreciation. OCBC analysts, however, cautioned that part of the recent movement could reflect policy-managed stability around the summit rather than a fundamental reassessment of the currency’s long-term value.
They pointed to the wide difference between US and Chinese yields and continuing weakness in China’s domestic economic fundamentals as reasons for caution.
That distinction is important because a currency can strengthen temporarily because of central-bank guidance, market positioning or expectations surrounding a major diplomatic event without establishing a new long-term trend.
Stronger yuan could reduce exchange-rate tensions
The currency’s strength also had a diplomatic dimension.
US officials and policymakers have historically raised concerns about China’s exchange-rate policies, particularly when a weaker yuan makes Chinese exports cheaper in foreign markets.
A relatively stable or stronger yuan can reduce the immediate scope for accusations that China is deliberately using currency depreciation to support exports.
Reuters reported that analysts viewed the PBOC’s approach as creating a more constructive backdrop for the Trump-Xi discussions.
However, the exchange rate was only one element of the much wider economic relationship between the two countries.
Trade remained a central issue
The summit was taking place against a backdrop of continuing US-China trade negotiations.
The two countries were dealing with tariffs, technology restrictions, supply-chain issues and disagreements over access to critical minerals.
Preparatory talks between Bessent and He had already addressed economic issues before Xi’s visit to Washington.
The yuan’s movement therefore provided financial markets with an additional indicator to watch as investors assessed the potential direction of the economic relationship.
Global currency markets were relatively calm
The yuan’s move occurred despite relatively limited movement across broader currency markets.
The US dollar index, which measures the dollar against six major currencies, was around 100.23 on September 21 after rising more than 1% during the previous week.
The relatively stable performance of the broader dollar market meant that the yuan’s movement was not simply the result of a broad-based decline in the US currency.
Instead, the PBOC’s currency fixing and expectations surrounding US-China relations were important factors in the yuan’s immediate performance.
What a stronger yuan means for China
A stronger yuan can have several effects on China’s economy.
It can make imported goods and commodities cheaper in yuan terms, potentially reducing some imported inflationary pressures. At the same time, a stronger currency can reduce the value of exporters’ foreign-currency earnings when converted back into yuan.
For a major exporting economy, the pace of appreciation therefore matters.
A gradual strengthening may be easier for policymakers and businesses to absorb than a rapid movement caused by changing market expectations.
The PBOC’s approach in September appeared focused on allowing some appreciation while maintaining control over the pace of the currency’s movement.
Yuan internationalisation also continues
The currency’s movement came alongside broader efforts by China to increase international use of the yuan.
Earlier in September, the Shanghai Clearing House began central-counterparty clearing services for spot trades involving the Singapore dollar, New Zealand dollar and Thai baht.
The development formed part of China’s broader effort to expand the yuan’s role in international trade and financial transactions.
Greater international use of the yuan could reduce some dependence on the US dollar in cross-border transactions, although the dollar remains the dominant currency in global financial markets.
Investors watched the summit for further signals
Financial markets were closely monitoring the Trump-Xi meeting because the outcome could affect tariffs, technology companies, supply chains and currencies.
Reuters reported that investors were already positioning around the US-China technology divide, with capital flowing into businesses and markets on both sides of the AI competition.
The yuan’s strength added another financial-market signal ahead of the leaders’ meeting.
It did not, however, provide a reliable indication of what the two governments would ultimately agree.
The currency story after the summit
The September 21 movement showed that China’s currency policy was becoming an important part of the economic backdrop to the Trump-Xi meeting.
The yuan’s rise to 6.6950 per dollar represented its strongest level since January 2023, while the PBOC’s stronger midpoint suggested greater tolerance for appreciation.
But analysts’ warnings remained relevant: the move did not establish that the yuan had entered a sustained appreciation cycle.
The longer-term direction will depend on China’s monetary policy, domestic economic conditions, US interest rates, capital flows, trade relations and the policies adopted by both governments.
As of September 27, 2026, the yuan’s multi-year high remains an important market development surrounding the latest phase of US-China economic diplomacy, but it should be distinguished from evidence of a permanent change in China’s currency policy.
Community
Comments
Keep discussion respectful and relevant. Comments never affect rewards.
No comments yet. Start a respectful conversation.