Yuan hits three-and-a-half-year high as dollar weakens

The onshore yuan strengthened past 6.75 per U.S. dollar on Thursday, reaching its highest level in three and a half years as a weakening greenback and strong Chinese export growth bolstered the currency. According to Caixin Global, the yuan opened at around 6.748 per dollar, its first recent opening below the 6.75 threshold. Trading Economics data showed USD/CNY falling to 6.7471 on August 6, continuing a steady appreciation trend that has seen the yuan gain more than 5.6% against the dollar over the past year.caixinglobal+1

Fading Fed Hike Bets Weigh on Dollar

The dollar's decline has been driven by a convergence of factors that have reshaped expectations for Federal Reserve policy. Wednesday's ADP private payrolls report showed only 44,000 jobs added in July, well below the 65,000 consensus, reinforcing a market narrative that the Fed can afford to hold rates steady. Growing optimism over a potential deal to reopen the Strait of Hormuz has further eased inflation concerns by pushing oil prices lower, reducing the case for additional tightening.convera+1

The Dollar Index slipped below 99.7, extending its slide even as Kansas City Fed President Jeff Schmid argued that tighter policy was needed to bring inflation down to 2%. Markets are pricing a 58% probability of a rate hike at the September FOMC meeting, down from recent highs. Minneapolis Fed President Neel Kashkari's call for gradual tightening has similarly failed to gain traction.actionforex+1

Asian Currencies Rally in Tandem

The yuan was not alone in its advance. The South Korean won rose to a 10-month high, with the USD/KRW rate falling as low as 1,414.55 per dollar in intraday trading on Thursday, according to Bloomberg data cited by Bloomingbit. Exporters including SK Hynix ↘ 2.16%, which recently raised $26.5 billion through a U.S. listing, have been selling dollars aggressively to fund domestic investment. The won has appreciated more than 9% against the dollar this quarter after being Asia's worst-performing currency in the first half of 2026.bloomingbit

Broader Market Backdrop

The euro and Canadian dollar also gained ground against the retreating greenback, with the S&P 500 reaching its 35th record high of 2026 as Q2 earnings growth tracked near 33% year-over-year. The combination of robust equity markets, falling oil prices, and soft labor data has created a self-reinforcing cycle of dollar weakness. Friday's non-farm payrolls report now carries added weight as the next major test for both Fed policy expectations and the dollar's trajectory.convera+1