Outlook
The yuan is likely to stay relatively firm in 2026, supported by policy stability and China’s continued push to reduce dollar dependence. Markets see a stable yuan with upside bias for 2026, helped by the PBOC’s ability to stabilize the currency under pressure and ongoing dedollarization efforts. In the near term, US monetary policy dynamics—particularly Fed rate-cut expectations—could influence USD strength and provide a modest lift to the yuan, while the PBOC’s digital yuan framework and emphasis on exchange-rate stability provide a constructive backdrop for gradual yuan strength.
Key drivers
- PBOC's digital yuan framework implementation strengthens management and infrastructure for the currency and could boost international use.
- Central Economic Work Conference emphasised yuan stability, signaling potential interventions to prevent sharp fluctuations.
- Markets see yuan stable with upside bias in 2026, aided by the PBOC’s demonstrated capacity to stabilize the exchange rate under market pressure.
- China’s dedollarization push aims to increase yuan use in international trade and finance, bolstering global yuan demand.
- US policy path and rate expectations: Powell opened the door to a potential rate cut, and markets broadly price in cuts, which could ease dollar strength and support yuan sentiment.
Range
CNY to USD: 0.1447; 3-month average 0.1431; range 0.1408–0.1449
CNY to EUR: 0.1223; near its 3-month average; range 0.1195–0.1239
CNY to GBP: 0.1070; near its 3-month average (0.1062); range 0.1039–0.1076
CNY to JPY: 22.34; near its 3-month average; range 21.90–22.81
What could change it
- Policy moves by the PBOC or broader economic support measures that alter yuan stability or liquidity conditions.
- Shifts in US monetary policy beyond currently priced-in expectations, especially a change in the pace or timing of Fed rate cuts, which would influence USD strength.
- China’s macro data and real estate sector health, along with stimulus intensity, affecting domestic growth and currency resilience.
- Progress in dedollarization and yuan internationalization, including broader use in cross-border trade and finance.
- Shocks to global risk sentiment or trade developments that alter capital flows and yuan demand.
