Offshore yuan logs third straight gain

The offshore yuan strengthened past 7.17 per dollar on Thursday, logging its third consecutive session of gains as the U.S. dollar retreated on a more dovish Federal Reserve outlook.

Market participants have now almost fully priced in a September rate cut, with some investors even betting on a more aggressive 50-basis-point move, spurred by softer-than-expected U.S. inflation readings and mounting evidence of a cooling labor market. The weaker greenback has provided room for Asian currencies, including the yuan, to recover from recent lows.

In response to the steep tariffs imposed on Chinese exports to the United States — often exceeding 30% — an increasing number of Chinese firms are accelerating plans to establish or expand operations in Indonesia.

Goods shipped from Indonesia to the U.S. currently face a far lower tariff rate of around 19%, making it an attractive alternative production base. This shift reflects a broader strategy among Chinese manufacturers to diversify supply chains and reduce vulnerability to trade-related disruptions.

Earlier this week, President Donald Trump extended the U.S.–China trade truce until November 10, maintaining a temporary freeze on additional tariffs and export restrictions. The extension has offered some relief to global markets rattled by months of escalating trade tensions, while also creating a narrow window for negotiators to push toward a more durable agreement.

For the yuan, the move has eased immediate depreciation pressure, though traders remain cautious given the lack of concrete progress toward resolving structural disputes.

Within China, investor attention is now turning toward a fresh batch of economic indicators due in the coming days. Key releases include home prices, industrial output, retail sales, and the urban unemployment rate — all of which will help gauge the health of domestic demand and the property sector. Any signs of further weakness could prompt additional policy easing from Beijing, which in turn might influence the yuan’s trajectory heading into the final quarter of 2025.

The combination of a softer U.S. dollar, shifting trade strategies among Chinese exporters, and the short-term reprieve from escalating tariffs is giving the offshore yuan some breathing room. However, its sustainability will depend on both the Fed’s policy path and China’s domestic economic performance, making upcoming U.S. and Chinese data releases key drivers for the currency’s next move.