CNY at a glance: China’s yuan moves into our bullish scenario in Daily Currencies Ratings 10/04/2026 CNY has outperformed most currencies vis-a-vis the dollar this year The Chinese yuan has tended to fall in the middle of the pack in terms of its performance versus the US dollar in the past few years, as the currency stability objective of the People’s Bank of China has led to very limited movement in the yuan. This has changed so far in 2026. Year-to-date, the CNY has actually been one of the notable outperformers against the USD, up 2.3%, easily outperforming most other Asian currencies on the year. Since the outbreak of the Iran war to the time of writing, the yuan (CNY) and the offshore yuan (CNH) are the only currencies in our tracked basket that have actually gained against the USD. So what’s the story behind this surprising outperformance? First, the market’s bullish sentiment has carried forward. We wrote about the building bullish sentiment in the last update of this report in January. In our conversations with a wide range of market participants, we note that this bullish sentiment on the CNY remains intact and seemingly quite widespread. Second, policymakers appear content to allow for further CNY strengthening. There was some question about this when policymakers cut the foreign exchange risk reserve ratio from 20% to 0% in what was an apparent attempt to halt the pace of CNY appreciation. However, after the outbreak of the Iran war, and the immediate spike in oil prices, there appeared to be a change of heart, as the PBoC’s daily fixings suggested a tolerance for further appreciation. Third, macro level drivers continue to suggest room for further appreciation of the CNY versus the USD if the situation in the Middle East is brought under control. China’s exports are off to another strong start this year, suggesting that the current account surplus is going to remain a positive factor for the yuan. Meanwhile, the currency has largely weathered the widening US–China yield spread, which should resume its narrowing trend if inflation expectations come under control. That is far from guaranteed. Since the outbreak of the war, two dominant narratives have emerged: warnings from experts that markets may be underestimating the impact, and a widely held expectation among investors of a TACO (‘Trump always chickens out’) scenario and eventual normalisation. Fourth, the CNY has been a surprising winner of the Iran war, despite China’s role as the largest oil importer in the world. At least a few market participants have mentioned re-evaluating the “China risk premium” amid rising global uncertainty elsewhere, which has led to China looking more and more like the adult in the room. While the actual direct impact has been tangential at best, discussions of the potential damage to the petrodollar system and rise of the petroyuan – aided by Iran’s plans to collect a fee for passage through the Strait of Hormuz to be collected in CNY or cryptocurrency – may have also added to longer term bullish expectations for the CNY. PBoC fixings suggest no opposition to gradual appreciation In this report series, we’ve often talked about the PBoC’s currency stability objective as one of the key deciding factors for the trajectory of the USD/CNY. The PBoC has exerted its influence on the currency primarily through its daily fixings. The counter-cyclical factor, which is the adjustment it makes to the daily fixing versus the previous day’s market closin