Onshore Yuan Hits 3.5-Year High; Analysts Expect Two-Way Volatility Ahead
Claire Weston
The onshore yuan closed at 6.7442 per dollar on August 10, its strongest since February 2023; analysts broadly agree that the second half will bring two-way volatility rather than continued one-way gains.
How big is this move?
The onshore yuan gained 59 basis points to close at 6.7442, a level last seen on February 2, 2023.
The daily fixing — the central parity rate the PBOC publishes each morning as a reference point for trading — was set 20 bps stronger at 6.7884, also its highest since February 2023.
This means → both the market rate and the official reference rate are back at levels not seen in three and a half years.
What is driving the rally?
The single biggest factor is strong exports. Wen Bin, chief economist at China Minsheng Bank, noted the trade surplus is likely to stay elevated.
A Huaxi Securities research note listed four reinforcing forces: a large trade surplus, rising corporate and household willingness to convert dollars into yuan, clearer Fed rate-hike expectations, and the ongoing internationalization of the yuan.
In plain terms = China is earning more foreign exchange while dollars already held onshore are being converted into yuan faster — supply and demand are pushing the rate up from both sides.
Can the rally continue in the second half?
Wang Qing, chief macro analyst at Orient Finance, is cautious: the drag from the Middle East conflict will gradually surface, and the durability of the AI investment boom remains uncertain.
He forecasts a second-half range of 6.7–7.0, with the full-year pattern likely to be "rally first, stabilize later."
This means → the sustained, rapid appreciation seen in the first half is unlikely to repeat; markets should prepare for two-way swings.
What about the longer horizon — is there still structural upside?
Liu Tao, a senior fellow at the China Chief Economist Forum, takes a multi-year view and sees a strategic appreciation trend through the 15th Five-Year Plan period and beyond.
He estimates the 2026 fixing will fluctuate between 6.6 and 7.0, with the offshore yuan likely swinging in an even wider band.
In plain terms = short-term, expect volatility in both directions; zoom out to a five-year frame, and the yuan's broad trajectory is still gradual strengthening.
What signals are the PBOC and SAFE sending?
At its August 1 second-half work conference, the PBOC stressed three priorities: let the market determine the exchange rate, maintain flexibility, and strengthen expectation guidance.
The State Administration of Foreign Exchange (SAFE) said cross-border capital has posted net inflows since the start of 2026, and it will step up monitoring of cross-border fund flows in the second half.
This reflects a policy stance of "no pursuit of one-way appreciation, no tolerance for disorderly depreciation" — let the market set the price, but keep the toolkit ready to intervene if needed.
Content is for reference only, not financial advice.