USD/CNH nears 7.00, despite disappointing Chinese activity data. Analysts note a rare setup with the PBoC fixing USD/CNY above model estimates, signaling a gradual approach to renminbi appreciation, with potential pressure for a stronger currency emerging in 2026, ING's FX analyst Chris Turner notes.

PBoC fixing USD/CNY above model estimates

"There is a lot of focus currently on the renminbi as USD/CNH approaches 7.00 – this despite some very disappointing Chinese activity data this week. Interest in the renminbi has been rekindled after Chinese November trade data showed that China had already amassed a $1tr trade surplus in the first 11 months of the year."

"The presumption is that Chinese exporters are waiting for better levels to sell their FX earnings. Yet a debate is emerging about whether local authorities should allow a stronger renminbi to rebalance the local economy away from exports and towards stronger domestic demand. And in fact, we are now seeing an extremely rare setup of the People's Bank of China (PBoC) fixing USD/CNY higher than model-based estimates for the fixing."

"In the last three years, in particular, the PBoC has been fixing USD/CNY lower than model-based estimates. Our Greater China economist, Lynn Song, believes the PBoC will not be rushed into accepting a much stronger renminbi, but pressure could build in 2026 – especially if we are correct with our house call for two more Fed cuts and a slightly weaker dollar."