Outlook
The yuan is seen holding a modest upside bias through 2026, supported by the PBOC’s stability framework, progress on dedollarization and steadier domestic data. Recent price action shows CNY strengthening to its highest level against the USD in about 10 months, consistent with softer USD pressures and policy-backed resilience. If U.S. rate-cut expectations continue to materialize, upside for the yuan could persist, otherwise volatility may remain limited.
Key drivers
- Global institutions expect a stable yuan with upside bias in 2026, underpinned by the PBOC’s demonstrated stabilising capacity.
- The PBOC’s digital yuan framework implementation in early 2026 and ongoing dedollarization efforts support a more resilient yuan in international trade and finance.
- The Central Economic Work Conference emphasized yuan exchange-rate stability, signaling potential policy actions to prevent sharp moves.
- U.S. rate-cut expectations, with the Fed opening the door to cuts, can influence USD strength and yuan direction.
Range
CNY/USD 0.1447 is 1.3% above its 3-month average of 0.1428, having traded in a very stable 3.1% range from 0.1405 to 0.1449.
CNY/EUR 0.1221 is near 7-day highs, just above its 3-month average, having traded in a very stable 3.7% range from 0.1195 to 0.1239.
CNY/GBP 0.1062 is near its 3-month average, having traded in a very stable 3.8% range from 0.1039 to 0.1078.
CNY/JPY 22.23 is just below its 3-month average, having traded in a quite stable 4.3% range from 21.88 to 22.81.
What could change it
- A sharper USD rally or a delay in Fed rate cuts could weigh on the yuan.
- Unexpected PBOC policy shifts or a more aggressive FX intervention stance could alter FX dynamics.
- China’s growth trajectory or property sector stabilization surprises could reinforce or temper yuan strength.
- Progress or setbacks in dedollarization and yuan internationalization could influence medium-term valuation.
