Commerzbank projects USD/CNY at 6.90 by June 2026 and 6.70 by late 2027, while EUR/CNY is expected to remain broadly stable. It says strong exports, a large current account surplus, and state-directed bank flows support China’s managed exchange-rate approach.
Since early April last year, the yuan rose against the US dollar almost continuously, but this changed at the start of the Third Gulf War. Since then, USD/CNY has largely moved sideways.
Yuan Behaviour In Global Shocks
During periods of major global economic or geopolitical disruption, the yuan has tended to stabilise against the US dollar. The Chinese authorities are expected to prefer a gradual yuan rise versus the dollar.
A steady move higher against the dollar aligns with efforts to promote wider global use of the yuan. At the same time, a modest rise versus the dollar could coincide with weakness against other currencies, especially the euro.
The yuan is expected to remain undervalued against most other currencies, which supports exports. The original article states it was produced using an AI tool and checked by an editor.
Given the recent sideways movement in USD/CNY, we see the current stability as a temporary phase driven by geopolitical stress. China’s Q1 export growth of 4.8% and a continued current account surplus provide a strong fundamental backdrop for the yuan. This suggests the managed, gradual appreciation against the dollar is likely to resume.
Positioning For A Managed Trend
For the coming weeks, selling out-of-the-money USD/CNY puts with expiries in the next quarter looks attractive for collecting premium. Implied volatility in the pair is sitting near 12-month lows at 4.5%, meaning options are relatively cheap and favor strategies that benefit from a slow grind lower in the exchange rate. This low volatility is a stark contrast to what we saw in other G7 currency pairs throughout 2025.
We should also position for yuan depreciation against the euro, as a stronger dollar pushes the single currency higher. The European Central Bank is signaling a pause in its rate-cutting cycle, while the People’s Bank of China is maintaining an accommodative stance to support growth. This policy divergence makes long EUR/CNY forward contracts or call options a logical pair trade.
It is critical to remember the yuan’s managed nature, with the daily fixing by the PBoC preventing erratic moves. The primary risk is not market panic but a sudden policy shift from Beijing, similar to the surprise devaluation we witnessed over a decade ago in 2015. Therefore, positions should be structured to profit from a slow, predictable trend rather than a volatile breakout.
