Yuan hits 3-year high as Asia FX muted today; rupee at record low

The Chinese yuan strengthened to a three-year high against the dollar as markets awaited the start of the Trump-Xi summit, while the Indian rupee slid to fresh record lows amid elevated oil prices and capital outflows. Global investors remained cautious, keeping broader Asia FX subdued.

The move was underpinned by a shift in the People’s Bank of China’s (PBOC) daily midpoint guidance and signs that authorities were tolerating modest appreciation ahead of high-level talks. Reuters reported the PBOC set the midpoint at 6.8401 per dollar — the strongest since March 24, 2023 — while onshore and offshore yuan traded near the mid-6.78s. Markets noted the currency has gained roughly 3% year-to-date, supported by robust export flows.

Equity benchmarks in China pulled back from recent highs as investors digested summit headlines, and Indian indices showed limited gains that were curbed by the rupee’s weakness. USD/INR pushed to record levels above the mid-90s per dollar, reflecting imported inflation pressures from oil and sustained foreign investor selling; volatility in regional currencies has translated into narrower risk-taking across asset classes.

Broader drivers include elevated crude prices tied to Middle East tensions and recent U.S. inflation data that helped keep the dollar supported. Higher oil has a pronounced impact on energy importers such as India, exacerbating current account and inflation worries, while hope for a détente in U.S.-China relations provided a counterbalancing tailwind for the yuan. Short-term FX moves are therefore being shaped by a mix of geopolitics, commodity dynamics and policy signalling.

Analysts say the summit’s optics and any concrete commitments will be key for near-term flows: a benign diplomatic tone could sustain yuan strength and risk appetite, whereas disappointments or renewed geopolitical flare-ups would likely push investors back into safe-haven assets and the dollar. For India, attention will center on Reserve Bank of India actions and oil price trajectories to gauge whether the rupee’s slide can be stabilized. Market participants expect elevated headline volatility until clearer policy or diplomatic signals emerge.