Outlook
The yuan is seen trading with a modest upside bias in 2026, supported by policy stability, dedollarization progress and a still-steady growth backdrop. Global institutions expect the currency to stay broadly stable with gradual appreciation (a tendency for the yuan to strengthen gradually) as policy tools help contain volatility. The PBOC’s digital yuan framework, implemented January 2026, strengthens policy transmission and cross-border use. The Central Economic Work Conference’s emphasis on stability suggests room for targeted interventions to prevent sharp moves. If US rate cuts proceed as markets expect, USD strength may ease, underpinning yuan resilience.
Key drivers
1) Global institutions forecast yuan stability with upside bias in 2026, reflecting credible policy response to market stress.
2) PBOC digital yuan framework implementation enhances management and infrastructure for the currency.
3) Central Economic Work Conference prioritizes yuan stability, signaling potential interventions to smooth volatility.
4) China’s dedollarization push reduces USD reliance and expands yuan use in trade and finance.
5) US monetary policy expectations: Powell signaled possible rate cuts later this month; markets expect cuts, which could weigh on the USD and support yuan.
Range
CNY/USD at 0.1447, 1.2% above its 3-month average of 0.143, having traded in a stable 3.0% range from 0.1407 to 0.1449.
CNY/EUR at 0.1228, 0.8% above its 3-month average of 0.1218, with a range from 0.1195 to 0.1239.
CNY/GBP at 0.1074, 1.1% above its 3-month average of 0.1062, trading in a range from 0.1039 to 0.1076.
CNY/JPY near 22.45, 0.6% above its 3-month average of 22.31, with a range from 21.90 to 22.81.
What could change it
1) A sharper-than-expected US rate path or a delay in cuts could strengthen the USD and push CNY lower.
2) Unexpected PBOC policy moves or FX interventions to curb volatility.
3) A faster-than-expected Chinese growth rebound or a sharper slowdown.
4) Progress or setbacks in dedollarization and cross-border yuan use.
5) Shifts in global risk sentiment or geopolitical tensions.
