ING turns bullish on Chinese yuan, shifts USD/CNY forecast lower to 6.70–7.05

ING turns bullish on yuan, citing policy shift and strong fundamentals.

Earlier:

• Yuan seen strengthening to 6.8 as China resilience offsets seasonal weakness

Summary:

• ING shifts yuan outlook into bullish scenario
• New USD/CNY forecast range: 6.70–7.05
• Yuan up over 2% vs USD this year
• Outperforming most major and Asian currencies
• PBoC signalling tolerance for appreciation
• Strong exports and current account support CNY
• Yield spread dynamics remain key driver
• Ceasefire and geopolitics boosting sentiment
• Gains may moderate if global FX rebounds

The Chinese yuan has entered a more bullish phase, with ING revising its outlook after the currency strengthened beyond its previous forecast range, supported by improving sentiment and shifting policy signals.

The bank now expects USD/CNY to trade in a 6.70–7.05 range for 2026, down from its earlier baseline, effectively moving what had previously been considered a bullish scenario into its central case .

The reassessment follows a period of notable outperformance by the yuan, which has risen more than 2% against the dollar this year and stands out as one of the few currencies to have appreciated since the onset of the Iran war . ING attributes this strength to a combination of sustained bullish market sentiment, supportive macro fundamentals and a subtle shift in the People’s Bank of China’s policy stance.

A key factor has been the PBoC’s apparent tolerance for currency appreciation. Daily fixings have moved closer to neutral in recent weeks, signalling less resistance to yuan strength after earlier efforts to limit gains. ING suggests this shift may reflect a policy preference to offset the inflationary impact of higher oil prices, given China’s status as the world’s largest crude importer.

At the macro level, China’s strong export performance and persistent current account surplus continue to provide structural support for the currency. In addition, expectations that US-China yield differentials could narrow again—particularly if inflation pressures ease and the Federal Reserve resumes rate cuts—are seen as another potential tailwind.

Interestingly, the yuan has also benefited from broader geopolitical dynamics. ING notes that amid rising global uncertainty, some investors are reassessing China’s relative stability, while longer-term themes such as the potential expansion of yuan usage in energy trade have added to constructive sentiment, even if their near-term impact remains limited.

While the bank maintains a positive outlook, it cautions that further gains may be more measured, particularly if a sustained ceasefire leads to a broader rebound in other currencies.