China's Yuan Boosts Ahead of National Day Holiday

China's yuan has strengthened against the US dollar ahead of the National Day holiday. This move is attributed to exporters converting their foreign sales proceeds into local cash, a trend that intensifies before long market breaks when companies need payroll and tax money.

The People's Bank of China (PBOC) set the daily midpoint at 6.7351 per dollar, its strongest since February 2nd, 2023. This has pulled expectations tighter for both onshore and offshore rates.

While this pre-holiday wave of dollar selling can push the yuan up, it's a concentrated spot dollar selling that can move prices quickly when trading volumes drop. The PBOC's support comes with an expiration date, as the flow can reverse after the holiday, making the yuan more sensitive to bigger drivers like relative interest rates and risk sentiment.