CNY at a glance: tightening our forecast band for rest of 2026
The desk's core thesis is that the CNY's recent performance in 2026 is noteworthy, prompting a forecast band adjustment to 6.67–6.92 for the year. Per the full note from ing-think, this adjustment is attributed to the CNY's resilience against the USD during a period of geopolitical turmoil and a stronger dollar backdrop, showing gains even when the USD has otherwise strengthened. Notably, the recent bullish sentiment among market participants could increase demand for the CNY, which the desk views could be tested in the coming months as external conditions evolve, particularly related to US interest rates. With no high-impact calendar events imminent, traders should strategize based on ongoing dollar dynamics and potential positioning shifts prevalent in the market.
What the desk is arguing
The desk posits that the CNY's fundamental strength has led to a forecast adjustment narrower band of 6.67–6.92 for the latter half of 2026. This reduction reflects a combination of strong performance amidst dollar strength and volatile geopolitical factors; notably, the CNY has been the only major currency to appreciate against the USD since the escalation of conflict in Iran which surprised many peers across the FX space.
Key evidence supporting this stance includes the CNY's 0.8-0.9% gain against the USD since the Iran conflict began, defying many expectations as other currencies faltered. This resilience indicates that demand for the CNY may remain high, especially if the dollar continues to strengthen, which could bolster CNY performance further despite broader market apprehension.
Where it sits in our coverage
Current consensus from various firms shows a target for the USDCNY at around 6.80, with notable forecasts including: - bofa: 6.75 - jpmorgan: 6.85 - citi: 6.80
The desk's outlook aligns within this range, slightly lower than some peers but reflecting a cautious optimism influenced by prevailing market sentiment. It is important to note that any unexpected movements in dollar valuation could skew this consensus, especially if bullish positioning on the CNY becomes overextended.
How other firms see it
Most firms are currently aligned on a bullish outlook for the CNY, with bofa and jpmorgan expressing similar sentiments on potential CNY strengths based on economic fundamentals. In contrast, some cautious firms like citi suggest that the recent gains may not sustain, indicating mixed sentiments in the broader market.
The trajectory of the USD/JPY could serve as a relevant indicator in assessing overall risk sentiment that influences the USD's strength against a range of currencies, including the CNY, showing a robust interrelation for traders to monitor closely.
How firms align with this view
Aligned with the desk view
Key takeaways
- 01CNY forecast band now 6.67-6.92 for 2H26.
- 02CNY has gained 0.8-0.9% against USD amid geopolitical tensions.
- 03Strong market demand for CNY may sustain unless dollar trends reverse.
- 04Majority bullish sentiment reported among market participants.
Market implications
Traders should keep a close eye on the performance of the US dollar against its peers, particularly the USD/JPY, which may signal shifts influencing the CNY's trajectory. Level 6.90 serves as a crucial resistance point if bullish momentum holds.
Risks to this view
A reversal could occur if the USD experiences unexpected strength due to hawkish actions or signals from the Federal Reserve, particularly if policymakers indicate a longer-term commitment to maintaining a high interest rate environment amid ongoing global tensions.
Articles CNY at a glance: tightening our forecast band for rest of 2026 05:18 FX China Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The CNY has been one of the top performers so far in 2026. With upside risks increasingly reflected in current valuations, we are narrowing and modestly lowering our forecast range to 6.67–6.92 for the remainder of the year. Lynn Song 6.67-6.92 Our 2H26 USDCNY fluctuation band CNY continues outperformance amid strong dollar backdrop During our last update , we looked at the forces behind the CNY (and offshore CNH) being the only currency to gain against the USD after the Iran war upended this year’s outlook, a move that surprised even seasoned FX desks.
At the time of writing, the CNY and CNH are up 0.8-0.9% against the dollar since the war began, the only currencies in our monitored basket gaining against the dollar in this time period. With the USD stronger after the market’s hawkish Federal Reserve repricing, and odds of re-escalation in Iran rising again after President Trump announced “the ceasefire is over”, we could be facing a similar scenario as we enter the second half of the year. Will the CNY outperformance repeat in the second half?
This is probably a more dollar-centric rather than CNY-centric question. The dollar-weakening trend would likely result in the CNY underperforming other currencies. The CNY’s stability would likely see it outperform in a continued strong-dollar environment.
In our conversations with market participants, a strong majority continue to hold a bullish view on the CNY. This market positioning can be a double-edged sword. While it means windows for CNY depreciation have typically been met with buying demand, it also raises questions about whether most market participants have already priced in these bullish factors.
CNY and CNH the lone gainers in our basket against the USD since the Iran war PBoC counter-cyclical factor nearing neutral The USDCNY is a managed floating exchange rate currency pair, which is allowed to move within 2% higher or lower on a daily level versus a fixing level set by the central bank. Market makers submit quotes based off the previous day’s closing price and overnight moves, and the People’s Bank of China (PBOC) then may apply a so-called counter-cyclical factor. This is the adjustment it makes to the daily fixing versus the previous day's market closing price, to exert its influence on the CNY’s trading levels.
This tool has been a key lever for containing sharp USDCNY swings during bouts of heavy market speculation. It gives the PBOC huge influence over the level of the CNY. In past years, the countercyclical factor was deployed mainly to resist depreciation.
But for most of this year, the PBOC has used the fixing only to lean slightly against the market rather than cap CNY appreciation outright. Amid the most recent move higher for the USDCNY, this counter-cyclical factor is back to nearly neutral levels, little changed compared to the spot price. We view this slower adjustment as a sign the PBOC isn’t shifting stance to encourage depreciation.
We’re still in a comfortable range for policymakers. Overall, the PBOC continues to strive for currency stabilisation as a policy objective, pushing back against rapid appreciation or depreciation. It will be a key factor keeping the USDCNY’s volatility relatively limited compared to most other global currencies.
With the PBOC holding fixings near 6.80 over the past month — after earlier, more gradual downward moves — that level now looks like a sensible midpoint for our forecast band for the second half of the year. Counter-cyclical factor back to neutral levels, fixings stable near 6.80 over past month FX correlation with US-China yield spreads weakened this year In recent years, US-China yield spreads have tracked the USDCNY trajectory quite tightly, with higher overseas yields prompting exporters to leave more of their proceeds abroad. This correlation was very tight, but has visibly broken down since late 2025.
We can see that the US-China yield spread has widened substantively, but the CNY continues to appreciate regardless. We believe that this partly reflects sentiment shifts on the CNY, adding to pressure on exporters to sell into any upswings seen in the USDCNY. This appreciation expectation also makes the yield spread relatively less attractive when considering the possibility of appreciation.
Furthermore, we expect the yield spread could narrow in the months ahead. Our Fed view looks for no rate hikes in 2026, and 50bp of rate cuts in 2027. This differs from market expectations for potentially 50bp of hikes over the same time.
Our PBOC view has a single 10bp cut for the rest of this year, and another 10bp rate cut in the second half of 2027. If market expectations gravitate towards these calls, the yield spread should narrow as well. Tight correlation between yield spreads and USDCNY broke down this year China’s export boom keeps current account surplus strong The current account balance has a strong historical correlation with the CNY trajectory; exporters tend to remit proceeds back into the CNY.
Exporter FX conversions have continued to support appreciation this year, as China saw exports grow over 15% year-on-year in the first 5 months of 2026. Amid China’s export boom, the current account surplus remains strong so far in 2026 at 3.69% of GDP in the first quarter. This is despite a simultaneous surge in imports due to higher tech supply chain prices and energy prices.
The trade surplus looks likely to widen in the second quarter after accelerating in April and May. Combined with a further slowdown of domestic data, this suggests that the current account surplus as a percentage of GDP might pick up again. Current account surplus should remain primary support for CNY Net investment outflows remain minor drag on the CNY China’s first-quarter balance of payments data showed that net portfolio investment remained negative for a ninth consecutive quarter.
We’ve seen net portfolio investment outflows for 16 of the past 17 quarters, beating out the Asian Financial Crisis for the worst stretch on record. Increased QDII quotas have supported more outbound portfolio investment, while relatively underperforming equity markets have limited inbound investment. In terms of direct investment, China’s outward direct investment (ODI) began to outpace inward foreign direct investment (FDI) starting from 2024.
This continued through the first 5 months of 2026, where we saw around $73.4bn of outward direct investment versus just $48.4bn of inward FDI. In year-on-year terms, FDI fell -8.6% YoY over the first 5 months of the year, versus a 7.1% YoY rise for ODI. New rules on outward investment came into effect on 1 July.
They might shift this balance somewhat, as corporations navigate new oversight rules on outbound investment. Considering both factors, the investment picture so far this year has generally favoured a weaker CNY, though it’s overshadowed by China’s current account and other factors. Investment flows have been modest drag on the CNY in recent years Narrow CNH-CNY spreads suggests limited speculative activity The spread between the USDCNH and USDCNY has been quite narrow for some time, suggesting the market’s speculation appetite is lower than in previous years.
This is likely thanks in large part to the PBOC’s generally successful efforts to maintain stability over the past few years. And as the PBOC’s management of offshore CNH liquidity improves. Market participants look less likely to try to test the PBOC’s appetite for rapid currency swings in either direction.
The room for arbitraging looks like it has continued to shrink, in a sign of market maturation. CNY-CNH spread has further narrowed RMB stability vs. dollar drove outperformance against peers With the CNY managing to eke out small gains against the dollar while the dollar itself has strengthened versus most other currencies, this has led to a natural outperformance of China’s trade-weighted currency indices. The CFETS RMB index has risen 4.1% since the outbreak of the Iran war, and 4.8% year-to-date, comfortably outperforming the 0.9% and 2.6% gains against the USD.
Our last report expected this outperformance to narrow if the Iran war ended. What we did not account for at the time was a more hawkish-than-expected start by new Fed Chair Kevin Warsh leading to another wave of dollar strength. Moving forward, the RMB’s performance versus other currencies is still likely to be more driven by the dollar, given the focus on currency stability appears to primarily apply to stability versus the USD.
CFETS RMB index has notably outperformed this year We tighten our USDCNY forecast band for the second half As we enter the second half of the year, we tighten and nudge down our USDCNY forecast band, revising it to 6.67-6.92. Since our last report, the upside risk for the USDCNY appears to have faded even further. Even with a stronger dollar pushing USDCNY higher, the climb from the 6.75 trough has been measured and gradual.
With markets already pricing in a hawkish Fed, modest PBOC easing, continued Middle East risks, and slowing Chinese growth, there might need to be substantial new catalysts to drive the CNY back toward the 7 level for the remainder of the year. Fundamental factors such as the continued strength and competitiveness of Chinese exports, the high quantity of exporters’ FX held abroad, a likely narrowing of the US-China yield spread continue to support a longer term CNY appreciation view. The biggest risks to our scenario are a change in the PBOC’s FX policy stance or a major shift in investor sentiment.
The former doesn’t look too likely at this juncture, given the success of this policy in stabilising markets. The latter, though, is worth monitoring considering we’ve been in this consensus bullish CNY environment for an extended period. When trends grow tired, sentiment can flip fast, as it did just last year, when markets swung from overwhelmingly bearish on the CNY to decisively bullish.
ING's USDCNY fluctuation band forecast Monetary Policy FX Federal Reserve Emerging markets China Asia Pacific Asia Markets Asia Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Author Lynn Song Chief Economist, Greater China Lynn Song joined ING in January 2024 as the Chief Economist for Greater China.
Prior to joining ING, he worked at China Construction Bank International, China Merchants Securities (HK), and Haitong… In this article CNY continues outperformance amid strong dollar backdrop PBoC counter-cyclical factor nearing neutral FX correlation with US-China yield spreads weakened this year China’s export boom keeps current account surplus strong Net investment outflows remain minor drag on the CNY Narrow CNH-CNY spreads suggests limited speculative activity RMB stability vs. dollar drove outperformance against peers We tighten our USDCNY forecast band for the second half
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