Key Points:
- The USDCNH (offshore yuan) weakens past 7.25 per dollar
- US dollar strength driven by Powell’s remarks on interest rates
- PBOC scales back support for yuan through midpoint fixings, keeping key lending rates unchanged for March 2025
Offshore Yuan Hits Lowest Level in Over a Week
The offshore yuan depreciated beyond 7.25 per dollar on Friday, hitting its lowest point in over a week, largely due to the US dollar’s continued strength. The greenback saw a rise, bolstered by comments from Federal Reserve Chair Jerome Powell, who noted that the Fed is in no rush to cut interest rates, which fueled dollar demand. The USD/CNH rate was at 7.25255 as of the latest data, with a high of 7.25963.
PBOC Scales Back Support for Yuan, Maintains Interest Rates
The People’s Bank of China (PBOC) has reduced its support for the yuan by scaling back its daily midpoint fixings, signaling its intent to prevent sharp depreciation against the US dollar. Traders view this as a sign of reduced intervention in the currency market.
On the monetary policy front, the PBOC kept key lending rates unchanged for the fifth consecutive month in March 2025, in line with market expectations. The one-year loan prime rate remains at 3.1%, while the five-year rate holds at 3.6%. Both rates are at historic lows, following cuts in October and July 2024. The PBOC has left the door open for future rate adjustments and changes to the reserve requirement ratio.
Technical Outlook
Picture: USDCNH tests resistance at 7.25357 after a steady rise from 7.22547, as seen on the VT Markets app.
The offshore yuan (USDCNH) increased by 0.03%, closing at 7.25255 after opening at 7.25068. The session saw a steady upward movement, reaching a high of 7.25963 before retracing slightly and closing just below the day’s peak.
The moving averages (MA 5,10,30) show strong bullish momentum, with short-term MAs consistently above the longer-term MAs. This indicates a continued upward trend. Additionally, the MACD (12,26,9) shows positive momentum, with the histogram expanding and the MACD line (blue) above the signal line (yellow), supporting the bullish outlook.
Key levels to monitor include 7.25357 as immediate resistance and 7.24597 as key support. A break above resistance could signal further upside momentum, while a drop below support may shift the sentiment to a more neutral or bearish stance.
Despite recent strength in the U.S. dollar, driven by positive economic data and expectations of tightening monetary policy, the offshore yuan remains under pressure.
However, ongoing efforts from the Chinese government to stimulate the economy and stabilize the currency may offer potential for a rebound. Market participants should monitor any policy shifts from the People’s Bank of China and further developments in U.S.-China relations for potential turning points.
