China has kept guiding the CNY higher since the first US‑China tariff truce in April 2025. USD/CNY broke below 7.00 in January, after dipping below its daily fixing in December 2025.
The tariff truce has been extended to November 2026. Presidents Trump and Xi plan to meet four times this year as both sides manage their rivalry.
Cny Credibility And International Use
Policy is now more focused on the CNY’s credibility and wider use outside China. This includes systems such as Digital CNY and CIPS.
The focus is moving away from export competitiveness. The goal is to support further opening and deepening of China’s capital markets, and to expand the CNY’s role in global reserves, trade, investment, and foreign exchange markets.
With China clearly guiding the Yuan stronger, we think the easiest path for USD/CNY is still lower. The pair has tested 6.85 several times this month, which supports the trend that began when it broke 7.00 in late 2025. Traders may want positions that benefit from further Yuan gains, such as long CNH futures or buying USD/CNY put options.
Beijing’s steady approach also makes sudden, sharp moves less likely, which keeps volatility low. One‑month implied volatility for USD/CNY options has dropped to multi‑year lows, recently hitting 3.5% versus over 5% in late 2025. This favors volatility‑selling strategies, such as short straddles, as long as policymakers keep pushing a slow, controlled rise in the currency.
Capital Inflows And Carry Appeal
This policy also aims to bring in foreign capital, which supports the internationalization push. China’s 10‑year government bond yield is steady near 2.8%, while the US 10‑year is closer to 2.2%. If the Yuan is stable and rising, the carry trade becomes more attractive. This yield gap can help support inflows into Chinese assets.
This marks a clear shift from earlier export‑driven policies that led to the sharp 2015 devaluation. The new priority is credibility. For example, transaction volumes through the CIPS payment system rose by more than 25% in 2025. A managed, stronger Yuan may also help steady other Asian currencies, which could support long positions in the Singapore Dollar or Korean Won.
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