China Maintains Yuan Fix Below 7.0 to Manage Appreciation Pressure

The People's Bank of China (PBOC) set the onshore yuan's daily fixing at 6.9852 on January 21, 2026, remaining below the psychological threshold of 7.0. This decision marks the 14th consecutive day the fix has been kept under 7.0, reflecting a sustained effort to limit the currency's upward momentum. Despite strong domestic demand and robust capital inflows, the PBOC is prioritizing external stability over speculative gains in the yuan. The central bank’s strategy underscores its ongoing balancing act between inflation control, economic growth, and exchange rate management. A stronger yuan can reduce export prices, potentially undermining manufacturing competitiveness—a key pillar of China’s economy. By maintaining a weaker-than-7 fix, Beijing reinforces its ability to influence market expectations and deter excessive foreign capital flows that could destabilize financial conditions. Onshore yuan spot rates rose to 6.9580 during intraday trading, indicating underlying strength in investor confidence. However, the PBOC's official fix remains a critical anchor. The gap between the fixing and actual trading levels suggests growing divergence, which may prompt further policy adjustments if volatility accelerates. Offshore yuan (CNH) traded near 6.9650, closely tracking the onshore rate but showing slightly greater sensitivity to international sentiment. Financial markets across Asia reacted cautiously, with regional currencies like the Korean won and Thai baht strengthening modestly. Investors remain attentive to any shift in PBOC communication, as even minor changes in the fixing mechanism could signal broader monetary or trade policy shifts.