On 25 November the on-shore and off-shore renminbi both hit 13-month highs against the dollar. The spot rate peaked at 7.0850 and the pair broke through the 7.09 level in both markets.

       On 26 November the PBOC fixed the central parity 30 pips stronger at 7.0796 (previous fix 7.0826).

       Analysts say the recent sharp weakening of the yen has stirred global FX volatility, while the dollar index has rebounded. Against this backdrop the CNY has traded steadily firmer. Externally, the market now prices a >70 % chance of a December Fed cut, leaving the DXY hovering around 100 and supporting non-USD currencies. Domestically, a steadily stronger daily fix has reinforced CNY appreciation expectations.

  Market consensus: short-term strength for the yuan  

       On 25 November the on-shore USD/CNY spot rate closed at 7.0938, up 118 pips from the previous session. In late trading it climbed further, touching an intra-day high of 7.0850—its strongest level since mid-October 2023. Off-shore, the CNH also broke through 7.09, matching the 13-month peak.

     “The rapid weakening of the yen has stirred global FX volatility; the DXY rebounded while CNY remained firm,” said Wang Qing, chief macro analyst at Oriental Jincheng. “Both on-shore and off-shore rates pierced 7.09 today and the CFETS basket index hit its highest level since early April.”

       Traders attribute the move to rising confidence in the yuan and expectations that the Fed will cut again, capping the dollar. “Markets now price a >70 % chance of a December Fed cut; the DXY is hovering around 100, supporting non-USD currencies,” noted Wang Zhiyi, head of the Cross-border Finance Research Institute. “A steadily stronger daily fix and improved cross-border flows are reinforcing CNY appreciation.”

       Wang Qing added that the People’s Bank has been guiding the fixing stronger, partly to recoup the currency’s under-performance earlier this year when the dollar tumbled. “This helps stabilise conditions for exporters.” Robust exports since July and a stronger domestic equity market have boosted settlement demand and sentiment. He expects the yuan to stay on the firm side in the near term.

  Fed-cut bets and a soft dollar underpin medium-term gains  

       With further Fed cuts likely and the lagged impact of Trump-era tariffs on the U.S. economy emerging, analysts see more upside for the yuan. “The DXY upside is limited,” Wang Qing said. Beijing has room to cushion external shocks: October saw a new RMB 50 bn policy-bank lending facility and an additional RMB 50 bn local-government bond quota to retire legacy debt and lift investment. “These tools will keep the economy on an even keel and underpin the currency.”

       Sheng Songcheng, professor of economics and finance at CEIBS, argues the yuan is likely to appreciate over the medium term, citing gains in technological competitiveness, a diversified trade structure, two-way investment flows and the global shift toward a multi-currency system.

       Previously,HUAQI’s Greater China chief economist Yu Xiangrong said CNY is set for greater two-way volatility with an upward bias. “The 2025 real effective exchange rate depreciated, yet USD/CNY stayed surprisingly stable thanks to the PBOC’s macro-prudential framework,” he noted. “If external stress eases, that anchor can be relaxed.” Purchasing-power parity, a widening trade surplus, narrowing China-U.S. yield spreads and renewed capital inflows all point to appreciation pressure. “7.0 could be the next test level for USD/CNY,” he added.