China strengthened the yuan by setting the currency's dollar reference rate below "7 yuan per $1." The 7 yuan per $1 level is a psychological barrier, and this is the first break in 2 years and 8 months.
The People's Bank of China, the Central Bank, on the 23rd set the dollar–yuan central parity rate (reference rate) at 6.9929 yuan per $1. That is down 0.0090 yuan from the previous day, and it is the first time the yuan's reference rate has fallen below 7 yuan since May 18, 2023 (6.9967 yuan).
Earlier, the yuan fell below 7 per $1 offshore on Dec. 25 for the first time in 1 year and 3 months. Factors cited for the sharp rise in the yuan's value include an influx of foreign capital on a booming Chinese stock market, a weaker dollar in global financial markets, and expectations of Federal Reserve rate cuts.
Markets are watching the possibility of further yuan appreciation. Earlier, Chinese financial authorities said at last month's Central Economic Work Conference that they would keep the yuan's exchange rate basically stable at a reasonable and balanced level.
Goldman Sachs said the dollar–yuan rate could fall to 6.95 yuan in the first quarter of this year and to 6.85 yuan in a year, while Australia and New Zealand Banking Group (ANZ) also said, "One of the best trades in 2026 will be 'sell dollars–buy yuan.'"