Yuan Nears Highest Level in Almost Eight Months
The Chinese yuan (CNY) is expected to maintain some pressure due to ongoing trade tensions and dollar weakness, according to recent institutional forecasts. By the end of 2021, the yuan is predicted to hover around the 6.5 to 6.7 range against the US dollar (USD), reflecting historical trends.
Looking further ahead, the USD to CNY rate is forecasted to be around 7.3559 by December 2025, indicating a slight depreciation of the yuan compared to current levels near 7.15. This trend is expected to continue, with the forecast further projecting a stabilized exchange rate around 7.3171 by mid-2026 (Q2 2026).
Analysts at UBS Global Wealth Management's Chief Investment Office anticipate the Chinese yuan to continue its gradual appreciation against the US dollar. However, the predictions assume the tariff truce holds and the US dollar continues to weaken. Broad dollar weakness, according to the analysts, should help limit downside in the yuan.
The yuan traded near an eight-month high hit in the previous session, with hopes for an easing of US-China trade tensions contributing to its strength. On Wednesday, the spot yuan opened at 7.1652 per dollar and held steady against the US dollar throughout the trading day. As of 0250 GMT, the spot yuan was trading at 7.1658 per dollar.
The main risk to this outlook, according to the analysts, is a breakdown in trade negotiations. If trade tensions escalate, the yuan could experience more significant depreciation against the US dollar.
In summary, the forecast for the Chinese yuan exchange rate against the US dollar suggests a modest weakening of the yuan in the medium to long term, with the USD to CNY rate projected to be around 7.3171 by mid-2026. These predictions, however, are subject to change based on shifts in geopolitical or economic conditions.
**Summary table:**
| Timeframe | USD/CNY Exchange Rate Forecast | Notes | |-----------------|-------------------------------|---------------------------------------| | End 2021 | ~6.5 to 6.7 (historical) | Based on prior observed trends | | December 2025 | ~7.3559 | Slight depreciation of yuan | | Mid-2026 (Q2) | ~7.3171 | Stable to slight weakening scenario |
Investing in the Chinese yuan business might offer some potential in the finance industry, considering the upcoming trade and the weak dollar could cause pressure on the yuan, according to institutional forecasts. However, analysts at UBS Global Wealth Management's Chief Investment Office forecast a gradual appreciation of the yuan against the US dollar, given the assumption of a tariff truce and continued weakness in the US dollar. Yet, the main risk to this outlook lies in a potential escalation of trade tensions, which could result in a more significant yuan depreciation against the US dollar. Therefore, taking trading risks when dealing with the yuan-USD exchange rate should be carefully considered due to geopolitical and economic uncertainties.
