TD Securities strategists expect Chinese authorities to keep USD/CNY volatility low through China’s 2026 Two Sessions. They do not expect officials to push back against a stronger yuan during this period.
They forecast USD/CNY will drift down to 6.7 by the end of 2026, in line with broader US dollar weakness. They add that the pair could reach 6.7 by mid-2026 if the current pace continues.
Post Two Sessions Policy Outlook
After the Two Sessions end on 11 March, they expect possible changes to structural foreign exchange settings. These steps would aim to slow further yuan gains and reduce one-sided moves in the exchange rate.
Authorities are likely to keep USD/CNY volatility very low during China’s most important political event of the year. TD Securities believes the People’s Bank of China is not resisting appreciation and would allow a gradual decline in the exchange rate. Their forecast points to a move toward 6.7 by year-end, in line with broad US dollar weakness.
Recent data supports this view. China’s exports rose 5.2% year-on-year in January, beating expectations. This strength may give officials more comfort to let the currency firm. The PBoC has also been setting the daily fixing stronger than market estimates, which signals it is comfortable with the current trend.
On the other side, the US dollar has been under pressure after a softer-than-expected Core PCE inflation report last month. Core PCE rose just 0.2%, which increased market expectations that the Federal Reserve could ease policy later this year. The dollar index also fell sharply through much of 2025 as the global recovery became more broad-based.
Strategy Implications For Options Traders
For the next two weeks, until the Two Sessions conclude on March 11, low volatility looks like the most likely outcome. This could favor selling volatility—such as short straddles or strangles—to collect premium. USD/CNY is trading near 6.82, and they expect it to remain in a tight range.
After mid-March, positioning for a further decline in USD/CNY may make sense. Buying put options with second-quarter expiries could capture a move toward the 6.7 level. The pace of appreciation has been fast, and TD Securities’ year-end forecast could be reached as early as this summer.
However, traders should watch for policy tweaks after the political event. If the yuan strengthens too quickly, authorities may adjust FX settings to slow the move. That could create risk for traders who are positioned too aggressively for further yuan strength after March.
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