Yuan Gains About 5% Against Dollar as PBOC Raises Foreign Exchange Reserve Requirement to 6%
Key Facts
The Chinese yuan gained about 5% against the dollar and about 9% against the euro in 2026 through November 6, according to a Reuters report, prompting the People’s Bank of China to tighten a tool aimed at curbing the currency’s pace of appreciation. On November 3, the central bank announced it would raise financial institutions’ foreign exchange reserve requirement by 2 percentage points, to 6% from 4%. The new ratio took effect on November 15. The bank said the move aimed to “strengthen the management of foreign exchange liquidity at financial institutions.” Reuters estimated the adjustment would withdraw an additional $24 billion from the financial system.
The announcement came as pressure on exporters mounted with the currency’s rise, even as the yuan’s strength was underpinned by strong exports, large trade surpluses and companies converting large amounts of foreign currency into local currency, Reuters reported. A source who exports dresses to Europe told the agency that the yuan’s recent rise had made his products expensive and “nearly swallowed his profit margins entirely.” Reuters’ comparison of profitability pressures showed that the median net profit margin at 5,209 listed Chinese companies was 4.9% in the first half of 2026, compared with 8.9% at 9,733 peer companies worldwide. The figures put the cost of a stronger currency in the context of companies operating with lower margins than their global counterparts. On trade rhetoric, Reuters reported that European leaders had called for a stronger yuan as China’s surplus widened and concerns grew about a new wave of exports.
After the November 3 announcement, the yuan fell in the onshore market by as much as 0.37% against the dollar, reaching a low of 6.6728 yuan per dollar, Reuters reported. The central bank had announced the measure about two weeks before it took effect, while the agency later reported the currency rising to a four-year high of 6.6449 per dollar in the week before its report published on November 9. The price action reflected two consecutive moves: an immediate decline after the announcement, followed by a stronger level in the following days. In a parallel effort to reduce the appeal of converting into yuan, more than 6 Chinese banks raised interest rates on dollar deposits in the weeks before the November 9 report. Those deposit rates reached levels not seen since at least 2023, according to people at the banks cited by Reuters.
Trade data show a contrast between a smaller monthly surplus and continued cumulative momentum. China’s goods trade surplus fell to $105.3 billion in October from $133.5 billion in September, as imports accelerated, the Associated Press reported. In October, exports rose 35.2% year over year, while imports increased 41.6%. The trade surplus reached $1.04 trillion for January through October, and the agency reported that China was on track to exceed the 2025 record of $1.2 trillion in 2026. Those surpluses, alongside strong exports and corporate conversions, remain among the factors Reuters cited to explain support for the currency.
In its third-quarter monetary policy report, the People’s Bank of China said it would keep overall borrowing costs low and keep the yuan exchange rate “basically stable at a reasonable and balanced level.” The bank also said China did not need to devalue its currency and had no intention of doing so to gain a trade advantage, and that it had never engaged in competitive devaluation. By contrast, U.S. Treasury Secretary Scott Bessent described the U.S.-China trade relationship as needing greater balance, saying the United States should produce more of what it consumes and China should consume more of what it produces. U.S. President Donald Trump and Chinese President Xi Jinping are expected to meet in Shenzhen the week after the Associated Press report published on November 11, in their third meeting of the year, with trade likely to be on the agenda. The agency said the fragile trade truce between the countries was at risk of ending in January, as trade tensions continued.