The offshore yuan advanced 6.9 per dollar on Tuesday, nearing its highest level in thirty-four months, as momentum built after Chinese regulators urged banks to curb excessive exposure to US Treasuries. Financial institutions were advised to rein in Treasury holdings, and trim positions where exposure is high, citing concerns over concentration risks and to mitigate the impact of uncertain US economic policies. The shift underscores a broader global move away from dollar assets and fueled expectations of a gradual structural shift in China’s currency strategy, especially after President Xi Jinping outlined ambitions for a “powerful currency” in state media earlier this month. Corporate demand for yuan also continued to surge ahead of the Lunar New Year holiday. Exporters and other companies typically convert dollars ahead of the week-long holiday to meet wages, supplier payments, and bonuses. Cumulative funds awaiting conversion since 2022 are estimated at around $1.13 trillion.
