Recently, the performance of the Chinese yuan has indeed been quite interesting. From breaking the 7.0 level at the end of last year, to soaring throughout the beginning of this year, and even briefly touching 6.81, hitting a nearly three-year high, this wave of appreciation has exceeded expectations.

Carefully examining the underlying logic, it’s not hard to identify three main driving forces: first, China’s export resilience is strong, with trade surplus reaching a record high of 1.2 trillion USD; second, the US dollar index remains relatively weak; third, foreign investors are starting to regain confidence in yuan assets. These factors stacking together naturally provide ample room for the yuan to appreciate.

However, this rally has not been smooth sailing. The central bank began to cut the foreign exchange risk reserve ratio at the end of February, signaling a desire to prevent excessive unilateral appreciation of the exchange rate. What does this imply? In the short term, the yuan’s appreciation pace may slow down, with more of a range-bound fluctuation. Currently, it’s roughly oscillating between 6.82 and 6.95.

Regarding the forecast of USD to CNY exchange rate, I’ve looked at analyses from several institutions. Goldman Sachs maintains a target of 6.70, believing the yuan is still undervalued by about 22%; HSBC predicts it could reach 6.75 by the end of the year. The common point in these forecasts is an optimistic view of the yuan’s medium- to long-term appreciation trend.

The core factors supporting this judgment are actually a few. First, China’s economic fundamentals are steadily recovering, with Q1 GDP growing 5.0% year-on-year, surpassing market expectations. Second, the US dollar’s credit has not yet recovered, and expectations of Federal Reserve rate cuts still exist. Additionally, the direction of China-US relations and geopolitical factors will influence short-term volatility.

To judge how the yuan will move next, I suggest focusing on several indicators. First, the central bank’s monetary policy stance, as easing or tightening directly impacts the exchange rate; second, China’s economic data, especially GDP, PMI, and trade figures; third, the performance of the US dollar index; fourth, the daily midpoint rate announced by the central bank.

The current question is, can the yuan still be bought now? My view is that in the short term, it’s not advisable to blindly chase the high. The central bank’s cooling measures are already quite clear, and May is usually a period when corporate forex demand is high, so the exchange rate is unlikely to surge all the way up. But from a long-term allocation perspective, if you have hedging needs or plan to hold long-term, staggered positioning still makes sense.

In terms of operation, the strategy is to enter gradually, set proper take-profit and stop-loss levels, and closely monitor the central bank’s policy moves and economic data. Although the appreciation of the yuan may slow down in the short term, as long as China’s economic fundamentals continue to send positive signals, the long-term trend of USD/CNY should still lean towards strength. However, remember that the forex market involves many factors, and any unilateral trend can be disrupted by unexpected events, so caution is always advised.