CNY: Hold your horses in 2026 – TD Securities

TD Securities' report by Alex Loo discusses the outlook for the Chinese Yuan (CNY) in 2026. The report highlights that while the CNY is significantly undervalued, expectations for a sizable revaluation may be misplaced. The People's Bank of China (PBoC) is likely to maintain a stable approach to the CNY, with a projected USDCNY target of 6.7 by the end of 2026.

Expectations for CNY gains in 2026

"If Beijing was open to a sizable revaluation (>10% in CNY gains), the broad USD sell-off in recent weeks would have been an opportune moment to show its intentions. However, PBoC's daily fixings and the weakness in the CFETS reflect the opposite."

"We think a push in USDCNY to the low 6s is a tad too far and Beijing likely won't endorse such a sizable revaluation. Since the shocked devaluation in 2015, our historical analysis of past annual returns of USDCNY vs the broad USD show that CNY gains have not outpaced the drop in the broad USD since 2014."

"Thus, we forecast a more rational move in USDCNY to reach 6.7 by end-2026, coherent with President Xi's 'Mighty Yuan' goal and his call for exchange rate stability."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)