Recently, I noticed an interesting turning point in the trend of the Chinese yuan, and this wave of appreciation has indeed exceeded many people's expectations. 2025 finally ended three consecutive years of depreciation, and at the start of 2026, the yuan accelerated its rally, rising nearly 600 points in just three trading days after the Spring Festival, directly reaching around 6.82, hitting a nearly three-year high. Market sentiment is clearly bullish, but because the rally was so rapid, the central bank has stepped in to "cool down" the market.

Behind this yuan appreciation, there are actually three main drivers supporting it. First, China's export performance remains quite resilient; in 2025, the trade surplus hit a record high of $1.2 trillion, a 20% increase from 2024, and this momentum continues into 2026. Second, the US dollar index is generally weak; although there have been several rebounds, it has not stabilized, currently fluctuating between about 98.0 and 98.5. Third, foreign investors continue to buy back Chinese assets, and confidence in China's economy has noticeably improved.

From a fundamental perspective, China's economy is also steadily recovering. In the first quarter of 2026, GDP grew 5.0% year-on-year, exceeding market expectations, indicating that the economy is undergoing structural optimization. The huge trade surplus drives demand for foreign exchange settlement, and cross-border capital inflows are increasing, all of which are important factors supporting the yuan's outlook. However, it is worth noting that the central bank announced at the end of February a reduction in the foreign exchange risk reserve ratio, signaling that the authorities do not want the exchange rate to appreciate excessively on the upside, so the short-term appreciation pace may slow down.

International investment banks are generally optimistic about the yuan's prospects. Goldman Sachs maintains a target of 6.70 for the next 12 months, believing there is about a 22% undervaluation. HSBC has lowered its year-end target to 6.75. The market consensus is that as long as the US dollar's credibility has not fully recovered and China's economic fundamentals continue to show positive signals, the yuan's upward momentum could persist.

So, is it appropriate to buy yuan now? In my view, in the short term, the yuan is unlikely to surge unilaterally, but the long-term logic still exists. The exchange rate is expected to fluctuate between 6.83 and 6.92, with even the possibility of slight retracements. For investors with long-term holding needs or those looking to hedge against dollar risk, there is indeed some value in current allocations. However, I recommend a phased approach, setting stop-loss and take-profit levels, and closely monitoring the central bank's daily midpoint quotes and China's trade data.

To judge the yuan's trend, several factors are key. First, the direction of the central bank's monetary policy; easing tends to weaken the yuan, tightening tends to strengthen it. Second, China's economic data—GDP, PMI, CPI—are all important; stable economic growth will attract continuous foreign investment inflows. Third, the US dollar trend; Federal Reserve policies are often the main driver of dollar movements. Fourth, the official stance on the exchange rate; the People's Bank of China influences short-term rates through the midpoint and forex interventions.

As of early May, offshore yuan was fluctuating around 6.82 to 6.95, with a cumulative increase of over 1,400 basis points, hitting a nearly three-year high. Overall, the yuan's outlook still has support, but short-term volatility may increase. The forex market is mainly influenced by macro factors, and the data released by various countries is transparent and publicly available, making it a relatively fair and advantageous investment choice for individual investors.