On September 22, the central parity rate of the Chinese yuan against the US dollar was set at 6.7459, an increase of 28 basis points from the previous trading day's fixing of 6.7487, with the prior official closing price at 6.6955 and the overnight session closing at 6.6953. Looking back at the past week, the central parity rate showed a fluctuating upward adjustment trend, with both offshore and onshore yuan-dollar rates once hitting the 6.70 threshold on September 18.

Industry experts believe that the recent appreciation of the yuan is a combined result of a sound domestic economic foundation and stronger export performance, and the exchange rate will continue to move in both directions, maintaining overall stability at a reasonable and balanced level in the future. From a global perspective, affected by monetary policy adjustments in major overseas economies and fluctuations in the Middle East situation, volatility in global foreign exchange markets has intensified, but the yuan has generally maintained a firm tone, with China's foreign exchange market operating robustly.

Multiple Factors Drive the Yuan's Exchange Rate Movements

Looking back at the past week, the central parity rate was adjusted upward in a fluctuating manner, with the offshore and onshore yuan rates against the dollar briefly touching the 6.70 mark on September 18. Regarding this round of yuan appreciation, several experts noted that strong exports and robust foreign exchange settlement demand contributed to the currency's firm performance.

Wang Qing, Chief Macro Analyst at Golden Credit Rating, said that two major factors are driving the yuan's strength. First, following the release of the effects of the US Federal Reserve's rate hikes, the overnight US dollar index surged and then fell back. Second, the central parity rate has been continuously adjusted toward a stronger direction recently. Wang Qing added that the support behind this comes from China's stable external trade environment and sustained high export growth, alongside steady progress in the domestic macroeconomy, which together build a solid fundamental base for the yuan.

At the same time, China has established a dual-pillar regulatory framework for cross-border capital flows combining "macro-prudential and micro-supervision" measures, which can effectively address the risks of large-scale cross-border capital flows arising from the monetary policy cycle mismatch between China and the US. Therefore, the market need not overestimate the impact of the Fed's rate hikes on the yuan exchange rate.

A research report from Soochow Securities identified three factors contributing to the yuan's steady strength. First, the foundation for a strong US dollar has weakened, boosting other non-US currencies. Since late July, the US dollar index has retreated nearly 3% from 101.6 to 98.6. After joint US-Japan intervention, Japan's foreign exchange reserves were depleted by $94.7 billion in August, while the yen appreciated nearly 7%, with the yen's strength directly undermining the dollar's robust base. Second, thriving foreign trade combined with a current account surplus has sustained the resilience of foreign exchange settlement. In August 2026, commercial banks recorded a net foreign exchange settlement surplus of $48.5 billion, far exceeding the monthly average since 2010. From January to August, the cumulative trade surplus reached $806.3 billion, well above the $520 billion average for the same period over the past six years. In Q2 2026, the current account balance was $195.1 billion, significantly higher than the $70.5 billion quarterly average since 2010. Third, the central bank's consecutive upward adjustments to the central parity rate have sent a guiding signal, with the counter-cyclical factor systematically turning positive, smoothing the slope of appreciation and reflecting that market supply and demand forces are pushing the exchange rate toward a moderate appreciation.

Research from Tianfeng Securities suggests that as China's trade surplus and current account scale expand, the support from the yuan's own fundamental factors for the exchange rate has significantly strengthened. With exports maintaining resilience, fundamentals have become an important anchor for the yuan, and one of the core supports for this round of yuan strength comes from the resilience of China's external trade environment and economic fundamentals. This year, China's exports have continued to grow strongly, with the overall external trade environment remaining stable. Export growth means companies continue to receive foreign exchange income in US dollars and other currencies, forming a relatively stable supply of foreign currency. Strong exports and current account surpluses can support the yuan exchange rate and partially offset capital flow pressures brought by changes in overseas monetary policies.

Analysis from China Merchants Bank Macro views the 6.4% appreciation of the yuan against the US dollar in the central parity rate over 18 months as a result of China's industrial upgrading driven by this round of AI development. Despite China reaching the Lewis turning point in 2011 and the US dollar index being in a strong cycle since 2014, the yuan has experienced three periods of relatively long, significant appreciation against both the dollar and a basket of currencies over the past 15 years, corresponding to 2012-2013, 2020-2021, and 2025 onwards, all driven by China's industrial upgrading. It is expected that while AI capital expenditure further consolidates China's industrial advantages, the yuan will maintain an appreciation trend; if AI capital expenditure growth slows, the yuan exchange rate may shift to two-way fluctuations.

Exchange Rate Expected to Remain Firmly Stable with a Slight Appreciation Bias

Regarding the yuan's trajectory for the rest of the year, analysts believe the exchange rate is likely to continue its steady and slightly firm performance in the short term, while later attention should be paid to changes in China's export growth and the impact of monetary policy adjustments in major overseas economies on the US dollar index.

Tianfeng Securities' analysis indicates that in the near term, the yuan may still maintain a steady and moderately strong operating pattern. On one hand, if China's exports and domestic economic fundamentals remain resilient, the yuan will continue to possess strong fundamental support. On the other hand, if the US dollar re-enters a period of fluctuation or weakness after digesting the impact of rate hikes, it will also improve the external environment for the yuan. First, as the exchange rate enters a relatively strong range, continued rapid appreciation may face certain resistance. Excessive appreciation could also increase exchange rate management pressure on export enterprises, so the subsequent trend is more likely to shift from one-way appreciation to high-level two-way fluctuations. Second, the yuan is expected to continue its steady and firm trend in the short term, with later attention needed on changes in export growth and the impact of overseas monetary policy adjustments on the dollar index. In terms of pace, the yuan will generally maintain a pattern of reverse movement against the dollar with relatively small fluctuations, and the exchange rate may show a "steady with upward bias" trend before the end of the year. Finally, the Fed's hawkish rate hikes have not changed the logic of the yuan's phased strength. The core pricing factors for the yuan are currently shifting from a simple "dollar cycle plus China-US interest rate differential" framework to a multi-factor framework of "dollar cycle plus China's fundamentals plus foreign exchange supply and demand plus policy adjustment."

In the short term, the yuan still has fundamental support, but as the extent of appreciation expands, high-level two-way fluctuations are more likely in the future, with "a floor on downside, a ceiling on upside, and increased fluctuation elasticity" potentially becoming an important feature of the yuan exchange rate in the next stage. Regarding the pace, Wang Qing expects that the yuan will generally maintain a pattern of moving inversely against the dollar with relatively small fluctuations. "The core fluctuation range for the yuan exchange rate is expected to be between 6.7 and 6.9 before the end of the year, with the full-year trend possibly showing 'appreciation first, then stability.'"

At a press conference held by the State Council Information Office on September 10, Lu Lei, Deputy Governor of the People's Bank of China, stated that to implement the "15th Five-Year Plan" Outline and the "Financial Powerhouse Construction 15th Five-Year Plan," the central bank has formulated and issued the "People's Bank of China 15th Five-Year Reform and Development Plan," along with nine supporting action plans in related fields, including playing the market's decisive role in exchange rate formation, enhancing the flexibility of the yuan exchange rate, and maintaining the yuan's basic stability at a reasonable and balanced level. Lu Lei pointed out that China implements a managed floating exchange rate system, adheres to the decisive role of the market in exchange rate formation, prevents market herd effects and the self-reinforcement of irrational expectations, and China has no need or intention to gain trade competitive advantages through exchange rate depreciation. Lu Lei also noted that with the transformation and upgrading of export structures, enterprises' bargaining power and exchange rate risk management capabilities have been continuously strengthened, and China's trade sensitivity to exchange rates has significantly declined. At the same time, foreign trade enterprises are increasingly using exchange rate hedging tools, and the share of the yuan in trade settlement continues to rise, further reducing the sensitivity of trade to exchange rates.