China’s yuan surged on Monday, briefly touching its strongest level against the U.S. dollar in about three years, as a wave of stronger-than-expected economic data reinforced the case for continued currency appreciation ahead of a high-stakes summit between President Donald Trump and President Xi Jinping later this week.
Hot Data Fuels the Move
The rally was driven by a one-two punch of trade and inflation data that surprised markets over the weekend. China’s exports rose 14.1% year-on-year in April in dollar terms, customs data showed Saturday, far exceeding the 7.9% increase anticipated by economists and accelerating sharply from the 2.5% growth in March. The trade surplus swelled to $84.8 billion.
Separately, the National Bureau of Statistics reported Monday that China’s producer price index jumped 2.8% year-on-year in April, a 45-month high and well above the 1.6% consensus forecast in a Reuters poll. The consumer price index rose 1.2%, beating expectations of 0.9% and accelerating from 1.0% in March. The NBS attributed the factory-gate surge to rising costs in non-ferrous metals, oil and gas, and technology equipment, with the Iran war’s disruption of global energy markets transmitting forcefully into prices.
Goldman Sachs said in a note Sunday that the yuan remains more than 20% undervalued against the dollar, upgrading its forecasts to 6.80 in three months, 6.70 in six months, and 6.50 in a year.
PBOC Signals Caution
The People’s Bank of China set its daily fixing at 6.8467 per dollar on Monday, stronger than the previous session’s 6.8502 but weaker than the Reuters estimate of 6.7988. The gap between the market estimate and the official fix suggests authorities are managing the pace of appreciation rather than letting the currency run freely.
ING had already shifted its yuan forecast into a bullish range of 6.70 to 7.05 for 2026, noting that the PBOC’s daily fixings have moved closer to neutral in recent weeks, signaling less resistance to yuan strength.
Summit Looms Large
The data arrives just days before Trump is scheduled to travel to Beijing for a two-day summit with Xi on May 14-15, the first visit by a sitting U.S. president to China in nearly a decade. Trade, Taiwan, the Iran conflict, rare earth export controls, and artificial intelligence are all expected to feature on the agenda. Analysts say the PBOC’s cautious approach to its daily fixing reflects a desire to avoid handing Washington ammunition on currency manipulation charges while still allowing fundamentals to drive the yuan higher.
