The PBoC would prefer to see an appreciating yuan to help promote the internationalization of the currency. At the same time, to preserve the price competitiveness of Chinese exports, the PBoC probably doesn’t want to see the yuan appreciating too quickly against the dollar, given our view that the dollar is likely to come under pressure again in the coming year, Commerzbank's Senior Economist Tommy Wu notes.

Stock market rally attracts capital inflows and demand for CNY

"The yuan (or renminbi) has stabilized between 7.10 and 7.15 against the dollar since late August. This followed a broad appreciation of the yuan, from as weak as 7.35 against the dollar in April following the 'Liberation Day' tariffs announcement by the US. Obviously, the broad dollar weakness plays a role. However, we see a few more reasons behind this."

"The recent stock market rally attracted capital inflows and demand for CNY. The Shanghai-Shenzhen CSI300 Index rose 30% since the recent low in April. The US-China tariff truce reached in early May, which got extended in August for another 90 days and again extended in November for one year to November 10th 2026, has provided some relief for businesses and investors. China’s record trade surpluses support CNY. The trade surplus in the first ten months of the year reached USD965 billion in total, which is 22% more than the same period last year. The PBoC has been strengthening the daily CNY fixing towards 7.08 from around 7.15 in July, signaling the central bank is allowing a gradual appreciation of the yuan.

"While the above factors may remain supportive of the yuan in the near term, factors 1 and 3 could face headwinds. Recent capital flows into China’s onshore financial markets may ease or even reverse if economic fundamentals and companies’ profitability don’t improve much. Also, there have been signs of softening in export momentum, as suggested by softer PMI new export orders and slower growth in exports to non-US markets in October."