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Forex

Yuan’s stronger fixes hampered by state banks buying dollars

ADMIN || 3rd February 2026

The potential for robust yuan strength against the dollar is becoming murkier. The PBOC’s fixing is appreciating at the fastest pace in more than a year, but state-owned banks’ dollar purchases are acting to cap onshore gains for the Chinese currency.

A 10-day moving average shows the appreciation pace for the daily fix picking up to about 40 points a day since Friday, the fastest since September 2024. On Monday, despite a near 0.9% overnight surge in the Bloomberg Dollar Spot Index, the fixing was just 17 points weaker for the yuan. And, for the first time since last November, it came in stronger than the median market survey rate. This suggests the dollar rebound didn’t derail the fixing’s firm adjustment bias.

That contrasts with this year’s slowdown in yuan gains for the onshore spot rate. The 10-day average for that pointed to daily gains of just 15 points on Friday. In the near term, a firmer dollar and fading seasonal corporate dollar selling could slow gains further. State banks tend to cluster dollar bids around 50 points stronger than the open on days of dollar weakness and heavy FX conversions. That effectively suppresses yuan upside.

The divergence between the fixes and spot rates comes as the US Treasury flagged the PBOC’s settings and increasingly opaque state-bank transactions as the two most important tools in China’s FX management.

The stronger fixing retroactively endorses the appreciation already seen in spot, helping to reinforce the broader trend. On the other hand, state banks are clearly signaling support for low volatility, deterring speculative positioning. That cools appreciation expectations and prevents any broader dollar weakness turning into a sudden surge in the yuan driven by herd behavior amid heavy conversion flows.

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