The renminbi has risen 3.3% year to date against the US dollar, outpacing other Asian currencies, and the move has also lifted its standing on the CFETS basket, which is nearing early‑2025 highs. The advance has held despite weaker terms of trade linked to elevated oil prices, suggesting broader support for the currency’s momentum.
Drivers cited include firm external demand alongside increased corporate foreign-exchange conversion. Policy settings are described as tolerant of further gains, framed around supporting RMB internationalisation and addressing perceived undervaluation, though the pace is expected to remain measured given soft domestic demand and reliance on exports. Near-term progress could slow during the dividend payment season.
Renminbi Strength and Policy Signals
We see the Yuan continuing its strong performance, which has been a key theme this year. This strength is backed by solid external demand, as evidenced by the latest May 2026 trade surplus of $82 billion. This trend keeps the currency well-supported against the US dollar and its Asian peers.
The authorities seem comfortable with this gradual appreciation, which we believe is a move to encourage global use of the Renminbi. The CFETS basket index is holding firm around 101.2, showing controlled strength against a broader range of currencies. This policy stance suggests that sharp interventions to weaken the currency are unlikely.
Trading Implications and Seasonal Headwinds
For the coming weeks, we believe selling low-delta US dollar calls against the Yuan is a prudent strategy. This approach profits from a slow, grinding appreciation in the CNY rather than a sharp rally. Selling out-of-the-money puts on USD/CNY could also be attractive to collect premium, given our view that downside for the Yuan is limited.
We must be mindful of the current dividend repatriation season, which typically peaks in June and July. This creates temporary demand for US dollars as companies make overseas payments, potentially slowing the Yuan’s gains. Looking back at 2024 and 2025, this seasonal flow often caused a short-term pause or minor reversal in the appreciation trend.
This temporary headwind suggests that outright long positions should be managed carefully. We prefer using option structures like call spreads on CNH, which define risk while positioning for the broader strengthening trend to resume later this summer. The potential for a slight increase in short-term volatility could present better entry points for selling premium.
