The Shanghai Composite Index rose 0.8%, reflecting a broader risk-on tone that may be helping the yuan outperform regional peers.
The daily midpoint set by the People’s Bank of China came in at 6.9414, marginally firmer than the previous 6.9398. Notably, traders observed that authorities appeared to apply less “damping” in the fixing mechanism. The deviation between market forecasts and the official fix narrowed to around +250 pips from +350 previously, suggesting the central bank is allowing greater alignment with market pricing.
The yuan is managed within a 2% trading band on either side of the daily midpoint. By setting a stronger reference rate and reducing the gap between model estimates and the official fix, the PBOC may be signalling increased tolerance for gradual currency appreciation.
A firmer yuan reflects both domestic and external dynamics. Improved sentiment in Chinese equities, a softer U.S. dollar backdrop and renewed capital inflow expectations have contributed to the currency’s advance. The reopening of mainland markets also released pent-up positioning flows, amplifying the move.
The break below the psychologically important 6.90 level could attract additional momentum-driven flows, particularly if the risk-positive tone in Chinese equities persists
