Yuan Hits 3-Year High Amid Escalating Trade Tensions

China's yuan has hit its strongest level in 3-1/2 years due to rising trade and geopolitical tensions. The currency gained strength as the US dollar index slipped by about 0.1 percent, a softer dollar contributing to its appreciation.

The yuan's value was also bolstered by easing Middle East tensions, which weakened the greenback's appeal globally. Global policymakers are increasingly aligned in discouraging competitive currency weakness, according to DBS, which noted that Asian currencies may recover as investors pay closer attention to appreciation rather than depreciation risks.

China is facing mounting geopolitical pressures and trade imbalances, with the Trump administration preparing to set a price floor for polysilicon products and impose tariffs on related imports. Additionally, Washington is drafting a ban on US imports of new Chinese data centre components due to national security concerns.