China reins in yuan amid weak domestic demand

China’s currency has been on a tear, gaining nearly 9% over the past 20 months and hitting its strongest level against the dollar in three and a half years. Normally, a government would celebrate that kind of appreciation. Beijing is doing the opposite. The People’s Bank of China and state-owned banks are actively working to slow the yuan’s rise, deploying interventions designed to keep the currency from getting too strong, too fast. China’s domestic economy remains stubbornly weak, and a muscular yuan threatens the one sector that’s actually firing on all cylinders, exports. The mechanics of managed restraint The yuan is currently trading between 6.72 and 6.78 per US dollar. The PBOC’s daily fixing rates have been consistently flat or weaker than what market models would suggest, with recent fixings landing around 6.7840. Average daily turnover in the onshore spot market dropped to roughly $31.2 billion in August, down from $42.2 billion in July. That’s a 26% decline in a single month. State-owned banks have also been spotted purchasing dollars directly, a tactic that mirrors interventions deployed in late 2025 and early 2026 when the yuan experienced sharp rallies. An economy pul...