China's yuan strengthened to its highest level in more than three years on Monday after reports that the United States and Iran reached a peace agreement, improving global market sentiment and reducing demand for safe-haven assets.

The onshore yuan climbed to 6.7573 per dollar, its strongest level since February 2023, while the offshore yuan also touched a three-year high. The move came as the U.S. dollar weakened broadly following news that Washington and Tehran had agreed to end hostilities and reopen the Strait of Hormuz, a critical route for global oil shipments.

The reopening of the waterway is expected to ease concerns over energy supplies and help lower oil prices, providing relief for many import-dependent economies across Asia.

Before trading began, the People's Bank of China set the yuan's daily midpoint at 6.8088 per dollar, the strongest fixing since February 2023. Despite geopolitical uncertainty in recent months, the yuan has remained resilient, supported by strong Chinese exports, improving energy security, and stable central bank guidance.

The currency has gained around 3.5% against the dollar so far this year, outperforming several regional peers.

Analysts at Goldman Sachs expect the yuan's strength to continue, citing the currency's undervalued levels and China's trade competitiveness. They believe Chinese policymakers are becoming increasingly comfortable with a gradual appreciation of the currency.

The stronger yuan reflects growing investor confidence as geopolitical tensions ease and global economic conditions improve.