Offshore yuan down to over one-month low

The offshore yuan depreciated past 7.15 per dollar on Wednesday, hitting its lowest level in more than a month as the Chinese currency came under renewed pressure from a strengthening U.S. dollar and growing global risk aversion.

The greenback’s rally was driven by safe-haven demand amid heightened concern over the ongoing U.S. government shutdown, now entering its second week, which has fueled anxiety about fiscal dysfunction and economic stagnation in the world’s largest economy. The combination of political uncertainty in Washington and dovish expectations for Federal Reserve policy has created a complex environment in global currency markets, with emerging-market currencies bearing much of the volatility.

In China, the yuan’s weakness also reflects lingering domestic growth concerns and policy divergence between the People’s Bank of China (PBoC) and other major central banks. While the Fed is expected to cut rates later this year, Chinese authorities have so far maintained a cautious easing stance, opting for targeted liquidity injections and credit support rather than broad-based stimulus. The PBoC has continued to set a stronger daily midpoint to anchor expectations, but persistent capital outflow risks and subdued investor sentiment have limited the effectiveness of these measures.

On the trade front, China appears to be quietly gaining leverage in the ongoing U.S.–China negotiations, as the absence of new Chinese soybean purchases—despite the start of the northern hemisphere’s harvest season—signals Beijing’s willingness to use agricultural imports as a strategic bargaining tool.

This calculated restraint underscores China’s intent to extract concessions from Washington while maintaining flexibility in its import strategy amid shifting global supply chains and softening domestic demand.

Markets are now closely watching the anticipated meeting between President Trump and President Xi Jinping on the sidelines of the APEC summit in South Korea, scheduled for October 31 to November 1, which could mark a pivotal moment in the trade dialogue. Investors are hoping for signs of renewed diplomatic engagement or potential progress toward de-escalating trade frictions that have weighed on global manufacturing and investment flows.

Still, analysts caution that even a symbolic thaw in relations may not be enough to reverse the yuan’s near-term weakness. With China’s property sector under stress, export growth slowing, and foreign investment flows moderating, the currency faces continued downward pressure. Unless the PBoC intervenes more aggressively or risk sentiment improves significantly, the offshore yuan could remain under strain, potentially testing deeper lows toward 7.20 per dollar in the weeks ahead.