Outlook
CNH remains bid as policy stability and yuan internationalization support the move. The yuan has risen to its strongest level in about 10 months against the dollar. If the Fed proceeds with a rate cut, USD weakness could extend CNH gains, aided by China’s stimulus and the digital yuan framework. However, policy surprises or renewed external shocks could cap the rally.
Key drivers
- PBOC’s Feb 11 fixing showed ongoing FX management and a preference for stability.
- December 2025 work conference signalled a continued push to curb yuan volatility.
- 2026 digital yuan framework enhances management and aligns with internationalization goals.
- 2025 moves to use yuan in trade (notably with Russia) underline broader adoption.
- Fed rate-cut expectations and Powell’s remarks support a softer USD backdrop, helping CNH.
Range
CNY/USD around 0.1458, 1.7% above its 3-month average of 0.1434, within a 0.1414–0.1462 range. CNY/EUR around 0.1240, 1.6% above its 3-month average of 0.122, within 0.1195–0.1240. CNY/GBP around 0.1088, 2.4% above its 3-month average of 0.1063, within 0.1039–0.1088. CNY/JPY around 22.84, 2.1% above its 3-month average of 22.37, within 21.90–22.84.
What could change it
- A clearer Fed path toward cuts could push USD lower and CNH higher.
- PBOC policy surprises or new FX interventions could move CNH quickly.
- Further progress in yuan internationalization or strong growth data could extend the trend.
- Renewed external headwinds or risk-off mood could pull CNH back.
