China has set the yuan at its strongest level since May 2023, with the People's Bank of China (PBOC) fixing the exchange rate at 6.9843 yuan per dollar. This move takes the yuan below the 7 yuan-per-dollar mark, reflecting a strategic shift in China's monetary policy amid a weakening U.S. dollar. The PBOC's decision comes as the dollar index has declined by 10% over the past year. Analysts suggest that the PBOC is comfortable with the yuan's appreciation as long as it does not significantly impact the renminbi's competitiveness. However, the PBOC remains cautious about further strengthening due to China's dependence on exports, which could be affected by a stronger currency.