The offshore yuan traded around 6.70 per dollar on Wednesday, maintaining its strongest level since January 2023 as investors increasingly considered it a funding currency for carry trades (borrowing cheaply to invest in higher-yielding assets). The yen’s recent surge has encouraged investors to seek alternatives, with the yuan supported by China’s comparatively low interest rates and currency stability. While major central banks face pressure to keep rates high or tighten policy further, lower borrowing costs in China reduce the expense of financing such positions. China’s annual consumer inflation rose to 0.8% in August from 0.5% in July, matching forecasts, while producer price inflation increased to 3.8% from 3.5%, above expectations of 3.7%. Higher energy costs amid continuing tensions in the Middle East mainly drove the increase in price pressures.