Outlook
Near term, the yuan faces modest weakness against the USD, with the USD/CNY around the 7.01 area after the 7.0197 parity on Jan 8. The PBOC is actively stabilising the currency by issuing offshore yuan bills in Hong Kong to absorb liquidity and limit downside pressure. In the longer run, forecasts from Goldman Sachs and ING point to yuan strength beyond the 7.00 level by end-2026, while RBC Capital Markets also sees USD/CNY drifting toward 7.00 as China’s growth stabilises, inflation stays subdued, and policy stays supportive. Current price action shows CNY to USD near 0.1440 (a 90-day high, about 1.4% above the 3-month average of 0.142). CNY pairs against EUR, GBP and JPY are trading near their 3-month averages, in relatively narrow ranges. Taken together, the setup suggests a gradual bias toward yuan firmer levels over the medium term, but near-term moves will hinge on policy signals and global risk sentiment.
Key drivers
- PBOC offshore yuan bill issuance in Hong Kong to absorb liquidity and cap downside pressure.
- The 7.01 level seen in the latest turnover, reflecting ongoing micro- and macro-level balance between policy support and market forces.
- Goldman Sachs and ING forecasting yuan strength beyond 7.00 per USD by end-2026, underscoring a still-constructive medium-term view.
- RBC Capital Markets’ view of USD/CNY moving toward 7.00 by end-2026, supported by trade surpluses, contained Chinese inflation, and a stable policy stance.
- Fed policy path and rate-cut expectations, with Powell signaling potential cuts later this month, potentially easing USD strength and offering some support to the yuan.
- Current cross-rate positioning: CNY/USD at roughly 0.1440 (90-day high), CNY/EUR around 0.1202 (below 3-month avg), CNY/GBP around 0.1042 (below 3-month avg), CNY/JPY around 22.04 (near the 3-month average); these levels reflect a period of contained volatility within recent ranges.
Range
CNY/USD is near 0.1440, with a 90-day high around 0.1440 and a 3-month average near 0.142. The last 90 days have seen the pair trade within a tight corridor from 0.1403 to 0.1440. CNY/EUR is about 0.1202, about 1.2% below its 3-month average of 0.1217, trading in a range roughly from 0.1195 to 0.1239. CNY/GBP is about 0.1042, about 2.1% below its 3-month average of 0.1064, within a 0.1039 to 0.1078 range. CNY/JPY is around 22.04, just below its 3-month average, in a range from 21.50 to 22.81.
What could change it
- Surprise shift in PBOC policy or a larger offshore yuan liquidity program, altering near-term volatility.
- A different U.S. monetary path (faster or slower Fed rate cuts) changing USD strength versus the yuan.
- Sudden shifts in Sino-U.S. trade relations or broader global trade dynamics.
- Chinese macro data surprises (growth, inflation, real estate sector risks) that alter the domestic policy outlook.
- Major geopolitical developments or shifts in global risk appetite that reprice cross-asset flows.
