Yuan hits 33-month high after China urges banks to cut US Treasuries

Monday 09 February 2026 - 16:20

By: Dakir Madiha

Yuan hits 33-month high after China urges banks to cut US Treasuries

The Chinese yuan climbed to its strongest level in 33 months against the US dollar on Monday, extending its longest winning streak in more than a decade after reports that Chinese regulators advised domestic banks to reduce exposure to US Treasury bonds.

The yuan traded as high as 6.9284 per dollar during Monday’s session, marking an eleventh consecutive week of gains, the longest such run since early 2013, according to Reuters. The People’s Bank of China set the daily midpoint at 6.9523 per dollar, down from 6.9590 on Friday, keeping the reference rate below the closely watched 7.0 level for a third straight week.

The latest advance followed a Bloomberg report saying Chinese regulators, including the central bank and the National Financial Regulatory Administration, had encouraged financial institutions to limit their holdings of US Treasuries amid concerns about concentration risk and market volatility. Banks with large positions were asked to gradually scale back their exposure, though the guidance does not apply to the sizeable Treasury reserves held by the Chinese state.

Authorities framed the move as a risk diversification strategy rather than a response to geopolitical tensions or doubts about US credit quality, Bloomberg reported. The guidance was issued ahead of a phone call last week between Chinese President Xi Jinping and US President Donald Trump.

Analysts at ICBC said currency conversions driven by favorable and seasonal factors continued to support the renminbi exchange rate.

Support for the yuan has also come from data showing a sharp rise in China’s foreign exchange reserves. Official figures released last week showed reserves increased by 41.2 billion dollars in January to 3.399 trillion dollars, the highest level since November 2015. The seventh consecutive monthly increase exceeded the 3.379 trillion dollars forecast by economists surveyed by The Wall Street Journal.

Market participants also pointed to strong export performance, seasonal demand ahead of the Lunar New Year holidays, and persistent weakness in the US dollar as contributing factors. Concerns about policy uncertainty in Washington, including shifting positions by President Trump on trade and diplomacy, were cited as drivers of volatility in US debt markets.

Chinese authorities appear willing to tolerate a measured appreciation of the yuan while resisting a rapid rise that could undermine exporters. Offshore yuan trading hovered around 6.93 per dollar on Monday, as the central bank stepped up liquidity injections to ease seasonal funding pressures.

Analysts expect future gains to be tightly managed. Gabriel Wildau, managing director at Teneo, said the key question is how much appreciation the central bank is prepared to allow given concerns over monetary tightening, unemployment, deflation, and export competitiveness.