Recently, the performance of the Chinese yuan truly warrants attention. I still remember at the end of last year, the yuan finally broke through the psychological barrier of 7.0, and after entering 2026, its appreciation momentum became even stronger, once surging to 6.81, hitting a new high in nearly three years. Recently, when I was monitoring the yuan against the Hong Kong dollar, I discovered that behind this wave of appreciation are some very interesting logical factors.

First, let's talk about external factors. The US dollar index has indeed been weakening, but this is not the main driver. What’s more interesting is that the yuan’s appreciation far exceeds the dollar’s decline. Especially after the Middle East situation changed in mid-March, the dollar appreciated against most currencies, only the yuan strengthened against the trend. What does this indicate? It shows that the yuan’s strength is supported by internal factors.

China’s export resilience is extremely strong. In 2025, the full-year trade surplus hit a record high of about 1.2 trillion USD, a 20% increase compared to the previous year. How big is this figure? It’s comparable to the GDP of one of the top 20 economies in the world. As we move into 2026, this momentum continues. In the first quarter, GDP grew year-on-year by 5.0%, exceeding expectations. The huge trade surplus naturally drives demand for foreign exchange settlement, and foreign investment is beginning to reallocate yuan assets. Cross-border capital net inflows are warming up again, which is the real driving force behind the yuan’s appreciation.

However, the central bank is also active. On February 27, the People’s Bank of China announced a reduction of the risk reserve ratio for foreign exchange forward contracts from 20% to 0%. This move is quite interesting; on the surface, it encourages exporters to buy US dollars, but in reality, it’s an official measure to cool down the rapid appreciation of the yuan. The central bank’s stance is clear: I want to stabilize the exchange rate and don’t want it to rise too quickly to harm export competitiveness.

Regarding future trends, the market is generally optimistic. Goldman Sachs maintains a 12-month target price of 6.70 for the yuan, believing there is about 22% undervaluation. HSBC sets its year-end target at 6.75. Many institutional analysts believe that as long as the dollar’s credibility is not restored and China’s economy continues to send positive signals, the yuan’s appreciation momentum could persist.

But there’s an interesting phenomenon worth noting. When I observe the yuan against the Hong Kong dollar, I find that the HKD is also appreciating along with the yuan. This reflects regional currency linkage effects. The stronger the yuan, the more the regional currency landscape is affected.

So, should you buy the yuan now? My view is this: in the short term, it’s unlikely to surge unilaterally. After the Spring Festival, in just three trading days, the yuan surged nearly 600 points. Market sentiment is indeed bullish, but the central bank has already taken steps to cool down. In the short term, the appreciation pace may slow, and the exchange rate is more likely to fluctuate within a range, estimated between 6.83 and 6.92, with even the possibility of a slight correction.

For investors with long-term holding needs or those looking to hedge against USD risk, there is indeed value in allocating now. But operationally, I recommend a phased approach—set clear profit-taking and stop-loss levels, and closely monitor the daily midpoint rates published by the central bank and upcoming trade data. The second quarter is usually a period of higher corporate FX purchase demand, which can also influence short-term exchange rate movements.

Ultimately, the yuan’s exchange rate trend depends on several core factors: the monetary policy stance of the central bank, China’s economic data performance, the dollar’s trend, and official guidance on the exchange rate. Grasping these factors well can greatly improve judgment accuracy. The forex market is mainly macro-driven; the data released by various countries is transparent and public, and with large trading volumes and two-way trading, it remains relatively fair and advantageous for individual investors.