Currency Showdown: Japan and China Strengthen Currencies while Dollar Dips

Key Takeaways:

  • 💵 Dollar slipped on Monday due to threat of currency intervention from Japanese authorities and rally in China’s yuan
  • 🇯🇵 Japanese yen rose 0.1% against the dollar
  • 📉 Dollar index decreased by 0.16% to 104.26
  • 🇨🇳 China’s yuan strengthened by 0.2% in onshore markets
  • 💹 Renminbi rebounded after strong signal from China’s central bank through a stronger daily reference rate
  • 📈 Onshore renminbi rose by 0.5% to 7.1902 per US dollar, the biggest increase since December
  • 💵 State-owned banks dumped dollars onshore, leading to tightness in offshore renminbi liquidity
  • 🛑 PBOC likely to prevent further renminbi weakness and curb sharp jumps in CNY/CNH
  • 🔒 PBOC facing challenge of maintaining supportive monetary policy while containing capital outflow pressure amid a strong dollar


The global foreign exchange market saw significant movements on Monday, with the US dollar slipping against the Japanese yen and Chinese yuan. The threat of currency intervention from Japanese authorities, combined with a rally in China’s yuan, contributed to the dollar’s decline.

Japanese yen strengthened by 0.1% against the dollar, while China’s yuan saw a 0.2% increase in onshore markets. The People’s Bank of China (PBOC) sent a strong signal by setting a higher daily reference rate, leading to a rebound in the renminbi. Onshore renminbi experienced its biggest increase since December, rising to 7.1902 per US dollar.

State-owned banks in China were reported to be selling dollars for yuan, creating tightness in offshore renminbi liquidity. The PBOC is expected to intervene to prevent further weakness in the renminbi and control sharp fluctuations in the CNY/CNH exchange rates. However, the central bank faces the challenge of maintaining supportive monetary policies while managing capital outflow pressures amid a strong dollar.

These currency movements not only impact the US dollar but also have implications for the global forex market and regional peers. The stability of the renminbi is crucial for maintaining balance in the forex market, with concerns about gradual depreciation towards levels seen in 2023. Both Japan and China took steps to strengthen their currencies, with Japan also addressing concerns about speculative trading in the yen and its competitive impact on the renminbi.

Overall, the forex market is navigating uncertainties caused by global economic challenges and potential interventions by central banks, creating a mixed outlook on the strength of the US dollar in the near future.

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