China's Yuan Strengthens Amid US Rate Cuts and Economic Shifts

China's currency, the yuan, is anticipated to strengthen as it approaches the key psychological level of 7.0 per US dollar, driven by US Federal Reserve rate cuts and improving trade relations. According to the South China Morning Post, analysts are optimistic, with some projecting the yuan could reach 6.8 by 2026.

Guan Tao, a former senior official with China's foreign exchange regulator, emphasized that key factors include Fed easing and the expectation of stable China-US trade ties. Market reactions are already evident, with the offshore yuan at 7.048 per US dollar and the People's Bank of China setting the fixing rate at 7.0656 per dollar on Monday morning.

Bank of America has forecast the yuan strengthening to approximately 6.8 per dollar by 2026, attributing this to a stable daily fixing, policy stimulus, and capital inflows. Similarly, Huatai Securities anticipates the yuan will strengthen to 6.82 per dollar by the end of next year.

The last time the offshore yuan traded below 7.0 to the dollar was in September 2024, according to financial data from Wind.