Chinese yuan hits 3.5-year high as dollar weakens after Fed holds rates

The Chinese yuan strengthened to 6.76 per US dollar on Thursday, its firmest level since early 2023, after the Federal Reserve held interest rates steady and offered no forward guidance on its next move.

PBOC Fixing Reinforces Yuan Strength

The People's Bank of China set its daily midpoint rate at 6.7892 per dollar ahead of Thursday's trading session, the strongest fixing since February 2023, reinforcing the currency's upward trajectory. The spot yuan touched 6.7600 in morning trade before settling in a narrow range.nst

The yuan's advance was driven primarily by broad dollar weakness following the Fed's decision. "The yuan strengthened due to the weakening of the dollar index," Nanhua Futures analysts said in a note. The dollar index fell to 100.92 as traders digested the lack of forward guidance from Fed Chair Kevin Warsh.fxstreet+1

Michael Wan, senior currency analyst at MUFG Bank, said the yuan may continue to outperform other Asian currencies, driven by a resilient domestic economy. The currency is up 3.5 percent against the dollar this year, supported by robust exports and energy self-sufficiency.nst

Gold Import Surge Follows Stronger Yuan

The yuan's appreciation has had knock-on effects in commodity markets. China's gold imports surged 89.1 percent year-on-year in the first half of 2026, reaching roughly 820 tonnes — the second-highest first-half figure on record — as a stronger currency made internationally priced bullion cheaper for Chinese buyers. June alone saw imports of about 173 tonnes, the highest monthly total since March 2024.aa+1

Broader Market Context

The Fed's hold came amid competing pressures from escalating Middle East hostilities, which pushed oil prices higher, and moderating U.S. inflation data. Fed funds futures still price in roughly 70 percent odds of a rate hike by year-end. Traders are also watching signals from China's Politburo meeting this week for additional policy direction.fxstreet+1