Outlook
The yuan is likely to remain broadly supported with a mild upside bias in 2026. The PBOC’s digital yuan framework, a continued emphasis on exchange-rate stability, and China's dedollarization push all support a stable-to-firmer CNY against major currencies. While a softer U.S. dollar path could further help CNY gains, occasional volatility may arise from domestic data surprises or shifts in global risk sentiment.
Key drivers
- PBOC's Digital Yuan Framework Implementation (January 2026) enhances management and payments infrastructure, supporting tighter control and smoother currency operations.
- Central Economic Work Conference emphasized yuan stability (December 2025), signaling potential interventions to prevent sharp fluctuations.
- Global institutions forecast a stable yuan with an upside bias in 2026, reflecting the PBOC’s capacity to stabilize the FX rate under market pressure.
- China’s dedollarization push continues, promoting yuan use in trade and finance and reducing dependence on the U.S. dollar.
- Market expectations of Fed rate cuts, with Powell signaling openness to easing, could keep U.S. policy rates lower and support a softer dollar, aiding CNY strength.
- Domestic stimulus and a supportive market environment have contributed to resilience, including past growth data and share-market performance.
Range
CNY to USD around 0.1447, 1.3% above its 3-month average of 0.1429, within a stable 3-month range of 0.1405 to 0.1449. CNY to EUR near 0.1228, at 14-day highs and 0.8% above its 3-month average of 0.1218, within 0.1195 to 0.1239. CNY to GBP around 0.1073, at 30-day highs and 1.0% above its 3-month average of 0.1062, within 0.1039 to 0.1075. CNY to JPY at 22.39, just above its 3-month average, within a 21.90 to 22.81 range.
What could change it
- Unexpected PBOC FX intervention or policy tweaks that tighten or loosen the yuan’s stability regime.
- A shift in U.S. rate expectations (for example, earlier or stronger-than-expected Fed tightening) or a surprise reform to the dollar path that strengthens the USD.
- Further progress in dedollarization that accelerates yuan use in international trade and finance.
- Domestic data surprises (strong growth or weak data) that alter capital flows or policy expectations.
- Global risk sentiment shifts or geoeconomic events that drive large capital moves into or out of Chinese assets.
