Europe gets the yuan rise it wants — just not the way it wanted
FXI•French debt tensions have helped push the euro to a 3½-year low against the offshore yuan, which has strengthened as China’s trade surplus expands. The yuan has gained as much as 10% against the euro over the past 12 months, including 5% in the past six weeks.
1. Yuan strengthens against euro
The offshore yuan reached its highest level against the euro since April 2023 on Monday, while also hitting its strongest level against the dollar in more than four years. The yuan has risen as much as 10% against the euro over the past year, including 5% in the past six weeks; additional euro weakness linked to French budget and bond-market tensions may have accelerated the move.
2. Trade tensions persist
European officials have argued that the yuan is undervalued and should be allowed to rise, while public and private estimates put its undervaluation at 20% to 30%. The European Union and China also reached an agreement to limit Chinese hybrid-car imports to 350,000 vehicles a year, with a 6% annual increase thereafter. Chinese hybrid exports to the bloc reached $7.5 billion in the first half of the year, up from $2.5 billion a year earlier.
3. Durability remains uncertain
China’s real effective exchange rate has risen more than 8% since the aftermath of last year’s tariff shock, reaching its strongest level in two years. The article says the yuan may need to gain at least another 10% to return to levels seen just after the 2022 Ukraine invasion, and that a resolution to France’s budget standoff could test the currency move.
