Insights 
VT 
The USD/CNH is continuing to decline, a trend that began even before the broader weakness of the US Dollar. This decline may be supported by exporter flows and potential inflows into Chinese portfolios, causing the renminbi to strengthen.
There is uncertainty over whether this trend results from foreign portfolio inflows into China or Chinese exporters selling their export earnings. Local authorities have maintained control over the USD/CNY and appear to be allowing the renminbi to appreciate.
Possibility Of Stronger CNY
There is a possibility local authorities favour a stronger CNY to boost domestic demand as they move away from an export-dependent model. Analysts anticipate the USD/CNY rate could drop to the 6.90 mark next year.
This information stems from market assessments and economic forecasts by experts, explaining the impact of USD/CNH fluctuations on future CNY value within China’s broader economic strategy.
We are seeing the USD/CNH pair continue its steady decline, recently touching the 7.05 level. This move is supported by stronger-than-expected Caixin Manufacturing PMI figures for November 2025, which came in at 51.2. This confirms the underlying strength in the Chinese economy that is helping the yuan.
We believe authorities are comfortable with this gradual appreciation, a noticeable shift from their defensive stance back in 2023 and 2024. During that period, the PBoC consistently set strong daily reference rates to prevent yuan weakness. Their current hands-off approach suggests a strategic pivot towards bolstering domestic consumption.
Growing Weakness In The US Dollar
This trend is amplified by growing weakness in the broader U.S. dollar. The latest U.S. CPI data for October 2025 showed inflation cooling faster than anticipated to 2.7%, fueling market bets on Fed rate cuts in the first half of 2026. This dollar-negative sentiment is providing a strong tailwind for the yuan’s advance.
For the coming weeks, we see value in strategies that profit from a gradual decline and low volatility in USD/CNH. Selling out-of-the-money call options with strikes around 7.15 or 7.20 for January and February 2026 expiries looks attractive to collect premium. Alternatively, traders could consider put option spreads to target a move towards the 7.00 level with defined risk.
