Onshore-Offshore Yuan Spread Still Exceeds 570 Basis Points as US-Iran Stalemate Persists

On August 27, the People's Bank of China set the yuan central parity rate at 6.7840 against the US dollar, down 11 basis points from the previous trading day, ending the brief 23-point appreciation seen on August 26. The central parity rate has recently fluctuated within a narrow range of 6.78-6.79, with official pricing remaining broadly stable. However, market exchange rates have continued to trade notably stronger than the central parity, with the onshore-offshore spread still exceeding 570 basis points.

**Central Parity Fluctuates Narrowly, Market Rate Remains Strong**

Reviewing recent central parity trends, the rate stood at 6.7817 on August 21, 6.7841 on August 24, and 6.7852 on August 25, depreciating for three consecutive days before a brief 23-point appreciation to 6.7829 on August 26, followed by an 11-point depreciation to 6.7840 on August 27. The central parity has moved within an extremely tight range of 6.7817-6.7852, indicating an official intent to maintain stability. Meanwhile, both onshore and offshore spot rates have been significantly stronger than the central parity, with the spread persistently exceeding 570 basis points. This structure suggests that market pricing of the yuan has not followed the central parity's moderate weakening bias but has instead maintained relatively positive expectations.

**US-Iran Stalemate Persists, Geopolitical Variables Weigh on FX Market**

The Middle East situation remains a key external variable affecting the yuan exchange rate. Reports indicate that the repeated shift between "brink of war" and "diplomatic restart" in US-Iran relations has caused geopolitical risk premiums to fluctuate sharply within short periods. Market sources suggest the Trump administration at one point halted large-scale military strikes and announced a resumption of talks, but Iran has denied such claims and reiterated its hardline stance on the Strait of Hormuz, leaving the prospects for substantive negotiation progress uncertain. Analysts point out that until geopolitical tensions clearly ease, the US dollar may remain firm, high oil prices will continue to constrain the Federal Reserve's pace of rate cuts, and non-US currencies will face overall pressure—though the yuan has shown relative resilience.

**Watch for Central Parity Signals and Geopolitical Developments**

The continued narrow fluctuation of the central parity rate is interpreted by the market as a policy intention to keep the exchange rate basically stable. The persistently elevated onshore-offshore spread reflects that market confidence in the yuan has not reversed due to external disturbances. Going forward, close attention should be paid to the actual progress of US-Iran negotiations and whether the central parity rate signals any directional adjustment.