In November, the Chinese Yuan (CNY) increased to 7.0742 per US Dollar (USD), its highest level since October 2024. This rise comes after the US decided to postpone tariffs on Chinese imports until November 2026. The potential easing of US-China tensions is highlighted by planned meetings between Presidents Trump and Xi Jinping. The People’s Bank of China set the USD/CNY central rate at 7.0789, which is the lowest since mid-October 2024. Despite ongoing tensions, some relief might be in sight by 2026 due to key diplomatic visits. President Trump is scheduled to visit China in April 2026, while President Xi Jinping is expected to visit the US later that year. Additional meetings will take place at the APEC Summit in Beijing and the G20 meeting in Washington.

Currency Dynamics

Given the Yuan’s recent strength, we expect a noticeable change in the USD/CNY dynamic in the coming weeks. The White House’s decision to prolong the tariff suspension until late 2026 removes a significant source of uncertainty that has weakened the currency. This means betting on a much weaker Yuan is now a riskier approach. This policy shift is supported by recent economic data, making it politically advantageous. The latest US CPI data for October 2025 shows a persistent 3.5%, giving Washington a strong reason to avoid tariffs that could increase consumer prices. This situation lays a solid foundation for continued currency stability into the new year. On the Chinese side, the latest Caixin Manufacturing PMI for November 2025 stood at 50.8, indicating slight but stable growth. This gives the People’s Bank of China confidence to strengthen the Yuan without worrying about harming the economy. The practice of devaluation to counter trade pressures seems to be on pause for now. Looking back at 2018-2020, we can see how trade war news created extreme volatility in this currency pair. During that time, implied volatility on USD/CNY options spiked with every new tariff announcement. Today’s situation, with planned high-level discussions, is vastly different.

Strategies for Derivative Traders

For derivative traders, this shift points to strategies that benefit from lower anticipated volatility. Selling short-dated options, like straddles or strangles on USD/CNY, could be a good strategy given the decreased chance of sudden market swings. With a clearer outlook, price fluctuations are likely to be less dramatic. The scheduled diplomatic meetings in 2026 between Presidents Trump and Xi suggest a commitment to managing tensions rather than escalating them. This guidance should help keep volatility in check for the coming months. Therefore, we should modify our pricing models for options to reflect a more stable and gradually appreciating Yuan. Create your live VT Markets account and start trading now.

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