I have been paying close attention to the trend of the Chinese yuan recently and have noticed some interesting changes. Since last year, the performance of the yuan against the US dollar has significantly improved, ending three years of continuous depreciation. Although there were fluctuations in the first half of this year, with the USD to CNY exchange rate once exceeding 7.4, the situation reversed starting in the second half. Especially in November, driven by easing US-China relations and increased expectations of Federal Reserve rate cuts, the yuan appreciated to below 7.08, even touching 7.0765 at one point, which is the highest in nearly a year.

Why has this shift occurred? I’ve summarized the underlying logic. First, US-China trade negotiations have steadily advanced, and signs of easing relations have appeared, providing strong support for the yuan. Second, the US dollar index has shifted from strength to weakness, with major currencies like the euro and pound sterling generally appreciating, and the yuan has also mildly appreciated accordingly. Third, market sentiment has stabilized, and concerns about yuan depreciation have significantly eased.

From a historical perspective, the yuan has experienced three distinct phases over the past five years. From 2020 to 2022, during the pandemic, it first appreciated then depreciated; in 2023, it remained above 7; and in 2024, volatility increased. Currently, it appears that the USD to CNY exchange rate may be at a turning point in its cycle. Many international investment banks have issued optimistic forecasts: Deutsche Bank expects it to rise to 7.0 by the end of this year and further to 6.7 by the end of next year; Morgan Stanley believes the US dollar index could fall back to 89 by next year, corresponding to a USD/CNY rate of around 7.05; Goldman Sachs is more aggressive, predicting the yuan will appreciate to 7.0 within 12 months, citing that the real effective exchange rate of the yuan is undervalued by 12%, with an even greater undervaluation against the dollar.

So, how will the future USD to CNY exchange rate trend develop? I think it’s important to focus on several key variables. First, the direction of the US dollar index: in the first five months of this year, the dollar index fell sharply by 9%. If the Federal Reserve’s rate cut cycle begins, the dollar could depreciate further, which would favor yuan appreciation. Second, progress in US-China negotiations: although recent signs of easing have appeared, uncertainties around tariffs still exist. Third, China’s economic data and the People’s Bank of China’s policy stance directly influence the supply and demand for the yuan.

From an investment perspective, I believe there are still opportunities in yuan-related currency pairs. In the short term, the yuan is expected to remain relatively strong. While a rapid appreciation below 7.0 seems unlikely, the depreciation cycle that started in 2022 may have ended, and the yuan could enter a new appreciation phase. The key is to seize the right timing, and also to monitor economic indicators like China’s GDP, PMI, and CPI, as these will affect foreign capital inflows.

If you want to invest in forex, you can open a foreign exchange account through a bank or find a reputable forex broker. Many platforms support two-way trading, allowing both long and short positions, so regardless of market direction, there’s a chance to profit. Of course, leverage trading can amplify gains but also increases risks, so it’s important to set parameters according to your own situation.

Overall, as China’s monetary policy shifts toward easing, the trend of USD to CNY exchange rate will become more apparent. By focusing on the key factors influencing the exchange rate, there are still opportunities to invest in yuan-related currency pairs.