Outlook
The yuan is seen holding firm with a modest upside bias into 2026, supported by policy stability, a clearer digital yuan framework, and slow dedollarization progress. Global institutions expect a stable yuan with upside potential this year, helped by the PBOC’s ability to stabilize the FX rate under pressure. Near term dynamics suggest range-bound moves with a gentle tilt toward modest appreciation if US rate-cut expectations weigh on the dollar.
The latest price action shows the yuan hovering near recent highs against the dollar while advancing in other major pairs, reflecting a favorable global backdrop for yuan resilience. If US rate cuts materialize as markets expect, a softer dollar could further support yuan strength, though policy steps to maintain stability remain a key theme.
Key drivers
- PBOC's digital yuan framework implemented January 1, 2026, improving management and infrastructure for domestic and cross-border use.
- Central Economic Work Conference (December 2025) prioritized yuan stability and signaled potential interventions to curb sharp fluctuations.
- Global institutions forecast a stable yuan with upside bias in 2026, citing the PBOC’s demonstrated ability to stabilize the exchange rate under market pressure.
- China’s dedollarization efforts intensify, promoting yuan use in international trade and finance.
- Markets note US rate-path expectations; Powell has left the door open to cuts, with markets broadly pricing in nearer-term Fed easing, which could weigh on the dollar and support yuan strength.
Range
CNY/USD is at 0.1447, 1.3% above its 3-month average of 0.1428, and has traded in a stable 3.1% range from 0.1405 to 0.1449.
CNY/EUR is at 0.1221, near 7-day highs, just above its 3-month average; range 0.1195 to 0.1239.
CNY/GBP is at 0.1067, near 14-day highs, just above its 3-month average; range 0.1039 to 0.1078.
CNY/JPY is 22.16, just 0.6% below its 3-month average of 22.29; range 21.90 to 22.81.
What could change it
- Unexpected PBOC policy shifts or sharper FX stabilization measures.
- Faster or slower progress on dedollarization affecting cross-border yuan demand.
- Surprise domestic data (growth, credit, real estate) altering risk sentiment toward the yuan.
- Unexpected US dollar moves driven by inflation surprises or stronger-than-expected Fed policy signals.
- Geopolitical or global risk events that alter risk appetite and capital flows.
