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China's yuan hit its strongest level in 3-1/2 years on Wednesday, as escalating trade and geopolitical tensions add to pressure for the currency to appreciate.
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The Chinese currency was also bolstered by a softer dollar index, as easing Middle East tensions weakened the greenback's appeal.
With the yuan under growing international scrutiny, “global policymakers appear increasingly aligned in discouraging competitive currency weakness,” DBS said in a note.
On Wednesday, the onshore yuan changed hands at 6.7470 per dollar around noon time, having touched the strongest level since February 2023.
The US dollar index slipped about 0.1 percent.
China is facing growing geopolitical risks as well as pressure over trade imbalances.
The Trump administration is preparing to set a price floor and impose tariffs on polysilicon and related products, seeking to protect US polysilicon factories from growing Chinese ambitions in the chip supply chain, sources told Reuters.
Washington is also drafting a ban on US imports of new models of Chinese data centre components on national security grounds, Reuters reported.
Meanwhile, the US has joined hands with Japan to stabilise a falling yen, while the European Union is pressing China over alleged yuan undervaluation.
"Taken together, these developments reinforce the case for investors to pay closer attention to Asian currency appreciation than depreciation risks," DBS said.
"This creates room for a broader recovery across Asian currencies."
Meanwhile, the dollar lost some luster on news that mediators were making progress in efforts to end the US-Iran war, driving oil prices lower.
Ahead of the market open, China's central bank set the yuan's guidance rate at 6.7889 per dollar, also the strongest in 3-1/2 years.
Reuters
