The current market bias for the USD to CNY exchange rate is bearish.
Key drivers include:
- The expectation of multiple interest rate cuts by the Federal Reserve may weaken the US dollar, boosting the appeal of the yuan.
- Investment firms anticipate that the yuan will strengthen, aided by a narrowing yield differential with the US and stabilizing trade relations.
- China's ongoing trade surpluses and low inflation could support gradual yuan appreciation.
In the near term, USD to CNY is likely to trade within a stable range, potentially reflecting recent lows.
An upside risk could emerge if unexpected strengthening in the US economy prompts a reassessment of Fed rate policies. Conversely, a downside risk exists if geopolitical tensions escalate tensions, impacting demand for the yuan negatively.
