USD/CNH is steady, staying within a two-month range as China releases October trade data showing weak exports and low domestic demand. The currency is currently trading between 7.0900 and 7.1500. Over the past year, from October 2022 to October 2023, China’s trade surplus was $1168 billion, slightly down from $1173 billion in September. The trade surplus with the US has dropped to $448 billion, reaching a near five-year low. In October, exports decreased by 1.1% compared to last year, while analysts expected a growth of 2.9%. This follows an 8.3% increase in September. Imports saw a 1.0% rise year-on-year, which is below the 2.7% expected growth and down from 7.4% in September. This weak growth in imports highlights ongoing issues with domestic demand.

Potential Currency Revaluation

China may look to gradually increase the value of its currency. This could encourage consumer spending by making imports cheaper, leading to higher disposable income. As a result, USD/CNH might decrease. Due to weak trade figures in October 2025, we anticipate that the USD/CNH pair will continue to trade within the 7.0900 to 7.1500 range. The unexpected drop in exports and slow import growth confirm persistent softness in China’s domestic demand. This is reflected in the latest Caixin Manufacturing PMI, which stands at 49.8, indicating contraction for the first time in five months. This economic weakness suggests that the authorities may prefer a stronger yuan, which would lower import costs and stimulate consumer spending. We believe they are considering a gradual appreciation of the currency, indicating potential decline for USD/CNH. The People’s Bank of China (PBoC) has already shown an easing stance by cutting the Reserve Requirement Ratio by 25 basis points last month. On the US side, the Federal Reserve has also indicated it will pause its rate hikes, easing the upward pressure on the dollar that has been present for several years. Recent US inflation data from October 2025 showed an annualized rate of 2.9%, reinforcing market expectations that the Fed’s next move is more likely to be a rate cut rather than an increase. This creates a favorable environment for currencies other than the dollar, including the yuan.

Opportunities For Derivative Traders

For derivative traders, the current low volatility offers a unique opportunity. Implied volatility for one-month USD/CNH options has dropped to around 3.5%, making strategies like buying puts on the pair relatively affordable ahead of a potential breakdown below the 7.0900 support level. We are positioning for a move towards the 7.0000 mark in the upcoming weeks. We have seen similar periods of consolidation before, especially in 2023, when weak data led to extended range trading. However, the combination of a dovish Fed and proactive easing from Chinese authorities makes a downward shift in USD/CNH more likely this time. Traders should closely monitor the PBoC’s daily fixes for signs of a change in their attitude toward yuan strength. Create your live VT Markets account and start trading now.

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