MNI: Chinese Yuan Seen Testing 6.60 Per Dollar In H2

The yuan is likely to strengthen further against the dollar in the second half of 2026, with forex experts and advisors pointing to 6.60 as a level with which the People’s Bank of China would be comfortable and with the currency supported by robust exports and the willingness of Chinese companies to settle foreign exchange.

Zhao Qingming, a veteran foreign exchange expert, sees the yuan on course to 6.60. The dollar outlook is relatively subdued, Zhao said, and while the dollar index has potential to rise from the current 100 to around 101, the greenback is likely to weaken if the conflict in Iran reaches a resolution and oil prices retreat.

It would be possible for the yuan to break through as far as 6.40 should the dollar index fall below 90, or even plumb eight-year lows at 90, he added.

While recent yuan appreciation has resulted in foreign exchange losses for exporters, China remains very competitive, Zhao said. The stronger yuan has also partially offset higher oil prices and boosted imports, and, more importantly for the authorities, makes China's GDP and per capita GDP rise in dollar terms, he said. (See: MNI: China's High-end Exports To Weather Yuan Appreciation)

The PBOC should also be content with gradual appreciation driven by real economy demand for settlement, which helps to promote the international use of the currency and is positive for domestic demand, according to Tan Xiaofen, a professor at the School of Economics and Management of Beihang University.

NO RAPID APPRECIATION

The PBOC’s declared goal of “preventing the yuan exchange rate from overshooting” is aimed at preventing a rapid appreciation, not at reversing trends, although, when it wants to act, its tools include jawboning, more forceful central parity prices in its daily fixings, and even direct window guidance if necessary, Tan said, noting the counter‑cyclical factor currently used in the PBOC’s price fixings acts as a speed bump to yuan gains. (See:MNI: Yuan Seen Around 6.80 To Dollar Before Gradual Gains)

Tan expects a range of 6.50 to 6.90 for the remainder of this year, with the trade surplus providing fundamental support, and sustained foreign exchange settlement contributing on the margins. Further yuan demand comes from foreign investor interest in Chinese technology stocks, though while this is contributing to a longer-term appreciation of yuan assets, it is not for the moment a key forex driver, he said.

The greatest risks to the yuan’s trajectory would be an unexpected hawkish shift by the Federal Reserve and weaker-than-expected Chinese economic data, Tan told MNI. An unforeseen recurrence of Sino-U.S. trade tensions could also significantly perturb yuan trading and demand for settlement, he said.

While markets now price in roughly 25 basis points of Fed tightening this year, a forex analyst noted that the yuan has appreciated by 3% against the dollar so far in 2026, meaning that exporters who converted into local currency and took out domestic one-year wealth management products at about 2% have made returns of 5%. However, more Fed rate hikes could make dollar deposit rates more attractive, tending to reduce exporter settlement into yuan, he said.

SETTLEMENT RATES

The forex analyst saw the USDCNY central parity rate falling to around 6.70 from the current 6.81 by the end of the year. But appreciation against other currencies is likely to be smaller, as the PBOC strengthens management of the RMB basket's fluctuation range, he predicted.

If FX settlement rates return to a high range of 65%-70%, the USDCNY central parity rate could fall to the 6.55-6.65 range by the end of the year, the analyst said. Alternatively, in a pessimistic scenario, if the FX settlement rate drops below 60% while export growth significantly underperforms the baseline scenario and the US dollar strengthens, the yuan could weaken, potentially taking the year-end central parity rate into the 6.85-7.00 range, he said.