Yuan Cracks ¥7 Barrier Against Dollar - First Time Since September

The Chinese yuan just punched through a critical psychological level, trading above ¥7 per U.S. dollar for the first time in over a year. That's a move traders have been watching like hawks.

What's Driving the Slide?

It's a classic cocktail of diverging central bank policies and shifting capital flows. While the Fed talks tough on inflation, expectations for further monetary easing from the PBOC are putting sustained pressure on the currency. Money's finding its way to higher-yielding harbors.

The Crypto Angle Everyone's Missing

Forget the traditional forex desks for a second. This kind of currency volatility is rocket fuel for the digital asset ecosystem. When fiat stability wobbles, the narrative for decentralized, borderless stores of value gets a major credibility boost. It's not about replacing the yuan overnight—it's about offering an alternative when trust in monetary policy erodes.

Watch for capital to seek digital hedges. Bitcoin and major stablecoins often see upticks in trading volume and regional demand during these periods of local currency stress. It's the ultimate irony: the very tools traditional finance mocks become the logical escape hatch for preserving wealth.

A weaker yuan might be a headache for Beijing, but for crypto, it's just another data point proving the old system is cracking. After all, what's a little currency devaluation between friends? Just ask the folks still holding Argentine pesos or Turkish lira—they've seen this movie before, and the ending always favors hard assets.

Central bank allows gains as dollar selling builds in local markets

The yuan has surged by more than 3.8% this year, helped by a weaker US dollar, money flowing into China’s stock market rebound, and easing global tensions.

“The yuan has been bolstered by weakness in the dollar and seasonal foreign-exchange conversion by exporters,” said Wang Qing, chief macro analyst at Golden Credit Rating. “A sustained yuan gain will be helpful in increasing the appeal of China’s capital markets to foreign investors.”

Onshore markets saw active dollar selling during Thursday’s session, as traders allegedly said large Chinese banks were buying dollars around 7.006.

Offshore trading remained thin as well. Hong Kong markets were closed on Dec. 25 and Dec. 26 for public holidays, which limited liquidity during the session, traders said.

Despite the rally, some banks say the yuan still trades at low levels when compared with trade partners and domestic conditions.

Goldman Sachs Group Inc. said the currency stood about 25% below levels suggested by economic fundamentals, including China’s ongoing deflation pressures.

Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group, said the yuan is likely to stay in a 6.95 to 7 per dollar range during the first half of next year.

Property debt talks resume as Vanke bond vote reaches deadline

Currency strength has unfolded alongside renewed pressure in China’s property sector. China Vanke Co., which recently secured temporary relief on a local bond, returned to negotiations as holders of another note finished voting on a payment delay.

Investors holding a 3.7 billion yuan bond, worth about $526 million, were given until 3 p.m. Thursday to choose from six proposals seeking to push back repayment. Without approval, the developer WOULD need to pay the bond when it falls due on Dec. 28, or within a five working day grace period, raising the risk of default.

Vanke carries about $50 billion in interest-bearing liabilities as the housing market continues to struggle with falling prices and weak demand. The latest talks followed a narrow vote that extended a grace period on a 2 billion yuan bond, even as a proposal to delay principal repayment by 12 months failed.

This week, S&P Global Ratings cut Vanke’s long-term issuer rating to selective default, saying the grace-period extension counted as a distressed debt restructuring.

Some offshore bondholders have been contacted by Houlihan Lokey Inc. and PJT Partners, firms often involved before formal creditor groups are set up to handle restructuring talks.

At the policy level, officials continue to adjust housing rules while avoiding direct rescues of individual firms.

Beijing city said it will ease home purchase rules for non-residents to support sales. The capital will cut the number of years buyers must have paid income tax or social security before they can buy a home, based on a Wednesday announcement.

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