China Yuan Hits 9-Month High as PBOC Boosts Fixing to 7.1161 Amid Fed Dovish Signals

China’s central bank moved swiftly to strengthen the yuan’s daily reference rate on August 22, 2025, setting it at 7.1161 per U.S. dollar — the firmest level since November 2024. The adjustment came in response to a sharp decline in the U.S. dollar after Federal Reserve Chair Jerome Powell hinted at a more dovish monetary policy at the Jackson Hole symposium, signaling potential rate cuts in the near future [1]. The dollar’s retreat created an opportunity for the People’s Bank of China (PBOC) to recalibrate the yuan’s positioning, balancing global market dynamics with domestic economic considerations.

The onshore yuan followed suit, trading at 7.1605 against the greenback and reaching 7.1593, its strongest level since late July [2]. However, the yuan’s broader performance against a basket of major currencies showed some weakness in the early session, highlighting the complexity of its movement in a shifting global environment. The fixing rate drop below 7.12 marked the first time since November 2024 that the yuan had reached such a level, indicating a more assertive approach by Beijing in responding to the dollar’s decline and stabilizing the yuan amid global uncertainty [3].

The PBOC’s move was part of a broader strategy to inject liquidity into the financial system. Over the month, the central bank added 600 billion yuan ($84 billion) through a combination of one-year Medium-Term Lending Facility (MLF) loans and reverse repo operations. This was the largest monthly liquidity injection since January and aimed to ease funding conditions while managing the risks of rising bond yields and investor flows shifting away from fixed-income assets [4]. The central bank’s overnight repo rate fell to 1.35%, reflecting the easing of short-term funding pressures [3].

In parallel with monetary easing, Chinese equity markets showed signs of strong investor inflows, particularly in technology sectors. Chip-related ETFs surged, with the CPIC SSE STAR Chip Design Thematic ETF trading at a 6.2% premium on Friday — significantly higher than its historical average [5]. This speculative buying was driven by optimism around domestic tech innovation and policy support, with DeepSeek’s new AI model launch further fueling investor confidence.

The yuan’s strengthening and broader liquidity measures underscore the PBOC’s balancing act — managing currency stability while supporting domestic demand and financial market resilience. Analysts noted that the yuan’s movement aligned with a broader trend of emerging market currencies gaining strength amid the Fed’s policy pivot. The PBOC’s decision also signals a potential long-term strategy to enhance the yuan’s international role, especially as global trade dynamics continue to evolve [6].

Sources:

[1] Mitrade, [https://www.mitrade.com/au/insights/news/live-news/article-3-1065780-20250825](https://www.mitrade.com/au/insights/news/live-news/article-3-1065780-20250825)

[2] South China Morning Post, [https://www.scmp.com/economy/china-economy/article/3323017/chinas-yuan-fixing-rate-hits-9-month-high-after-dovish-pivot-us-fed-chair](https://www.scmp.com/economy/china-economy/article/3323017/chinas-yuan-fixing-rate-hits-9-month-high-after-dovish-pivot-us-fed-chair)

[3] Bloomberg.com, [https://www.bloomberg.com/news/articles/2025-08-25/pboc-strengthens-yuan-fixing-by-most-since-january-after-powell?srnd=phx-fixed-income](https://www.bloomberg.com/news/articles/2025-08-25/pboc-strengthens-yuan-fixing-by-most-since-january-after-powell?srnd=phx-fixed-income)

[4] TradingView, [https://www.tradingview.com/symbols/SGX-UC1!/ideas/?contract=UCN2026](https://www.tradingview.com/symbols/SGX-UC1!/ideas/?contract=UCN2026)

[5] Mitrade, [https://www.mitrade.com/insights/news/live-news/article-1-1065659-20250825](https://www.mitrade.com/insights/news/live-news/article-1-1065659-20250825)

[6] Bank of England, [https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2025/trading-blows-the-exchange-rate-response-to-tariffs-and-retaliations](https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2025/trading-blows-the-exchange-rate-response-to-tariffs-and-retaliations)