Brown Brothers Harriman reports on China’s efforts to enhance the international use of the Yuan. The People’s Bank of China supports the Hong Kong Monetary Authority to facilitate this process.
Despite the Yuan being less used globally compared to the Dollar, there are opportunities for it to see gradual increases in usage worldwide. The development of necessary infrastructure is viewed as a positive factor for the currency’s growth.
A Gradual Growth
We see this as a signal for a slow, managed appreciation of the yuan over the coming quarter. This isn’t a call for a dramatic rally, but a gradual grind lower in the USD/CNH exchange rate. Traders should therefore look at strategies that profit from low volatility and a steady trend.
The view is supported by recent data showing the yuan’s share of global SWIFT payments hit a new high of 4.8% in December 2025, a steady climb from the 4.7% we saw in the third quarter of last year. This incremental gain reinforces the idea that central bank and corporate usage is slowly expanding. This trend makes holding short USD/CNH positions more fundamentally sound.
Further evidence came last week with the announcement of an expanded digital yuan settlement program for commodity trades with the UAE. Looking back at 2025, we saw similar pilot schemes with Brazil and Argentina, all of which contribute to building out this new infrastructure. These are small steps, but they are all consistently in the same direction.
Strategic Positioning
Given this outlook, selling out-of-the-money call options on USD/CNH seems like a viable strategy for the coming weeks. The managed nature of the currency should keep implied volatility capped, allowing traders to collect premium while positioning for the dollar to either weaken or stagnate against the yuan. We believe the path of least resistance for the pair is downwards.
When we reflect on the property sector fears that caused anxiety in mid-2025, the yuan showed surprising resilience above the 7.35 level. That defensive stance by officials suggests a strong desire to prevent runaway weakness. This historical precedent gives us confidence that the downside for the yuan is well-protected, making it a favorable currency to own against the dollar.
This structural tailwind suggests that forward contracts could also be an efficient way to position for yuan strength. The cost of carry for holding a long CNH position against the dollar remains attractive. This allows for a longer-term expression of the view that the yuan’s internationalization will continue to provide a floor for the currency.
