On April 21, the US Dollar Index weakened further, hitting a low of 98.06 and testing the key support at 98. Major non-US currencies staged a strong rebound. Both onshore and offshore yuan against the US dollar climbed higher. The offshore yuan touched 6.81264 at one point, while the onshore yuan reached 6.8153, marking its highest level so far this year and the strongest since March 23, 2023. On the same day, the central parity rate of the yuan against the US dollar was raised by 54 pips from the previous day to 6.8594.

 

 

Looking back at this round of appreciation, the yuan’s strong performance follows a clear trajectory.

 

At the end of 2025, both onshore and offshore yuan closed above the 7.0 mark against the US dollar. Entering 2026, the yuan maintained its upward momentum. At that time, growing market expectations for Federal Reserve rate cuts kept the US dollar trading in a weak range, and the Dollar Index had been declining continuously since January.

 

Later, amid intensifying geopolitical frictions, the Dollar Index edged up temporarily. Nevertheless, after peaking at 100.643 on March 31, the index embarked on a sustained downtrend. Despite occasional rebounds, its overall trading center kept moving lower.

 

On April 17, the Dollar Index slid to a low of 97.632, yet its daily losses narrowed sharply by the close. On April 21, the index hovered around the 98 level, with its lowest point at 98.06.

 

Markets widely believe the latest yuan appreciation is driven by combined domestic and international factors. Geopolitical tensions abroad have eased, cooling market safe-haven sentiment and reducing dollar demand. Meanwhile, global capital is flowing back to emerging markets, boosting appetite for yuan assets. Fundamentally, China’s sound economic fundamentals, resilient foreign trade, and recovering domestic demand underpin the currency. In addition, a package of exchange rate stabilization policies rolled out by the central bank has fortified policy-level safeguards for exchange rate stability.

 

Wang Qing, chief macroeconomic analyst at Oriental Jincheng, stated that falling US Dollar Index overnight, triggered by news of potential resumed US-Iran negotiations, has strengthened upward momentum for major non-dollar currencies including the yuan.

 

He pointed out that amid recent geopolitical risks in the Middle East triggering volatile global foreign exchange markets, the yuan has remained generally stable with a mild appreciation bias. While the Dollar Index edged up merely 0.1% year-to-date, the yuan has appreciated 2.2% against the US dollar. The CFETS RMB exchange rate index, which measures the yuan’s value against a basket of currencies, also climbed near its one-year high. This is underpinned by limited spillover impacts of Middle Eastern unrest on China’s economy, steady external trade conditions, sustained export growth, and improving domestic consumption and investment data since the start of the year.

 

Wang noted that although Middle East tensions are easing, lingering uncertainties will keep the region the dominant driver of US dollar trends, and high volatility will persist across global currency markets. Nevertheless, as China’s external trade environment is set to stabilize further, exports will maintain robust growth, and policies to boost domestic demand will deliver more tangible effects. Thus, the yuan is highly likely to stay stable and moderately strong amid large swings in the Dollar Index.

 

Zhang Xiaojiao, analyst at BOC International, attributed the recent yuan strength to three core reasons. First, geopolitical uncertainties in the Middle East have disrupted shipping through the Strait of Hormuz, threatening global energy security and energy chemical industrial chains. Second, rising global oil prices have begun to reshape worldwide economic and inflation outlooks, while China’s expansionary fiscal policy and low inflation environment stand in sharp contrast with major developed economies. Third, reasonably valued yuan assets and competitive advantages in the technology sector are attracting growing global capital allocation amid international portfolio rebalancing.

 

China’s Q1 economic data was officially released on April 16. According to the National Bureau of Statistics, preliminary estimates show China’s first-quarter GDP reached 33.4193 trillion yuan, growing 5.0% year-on-year in constant price terms. The growth rate hits the upper bound of the full-year growth target range of 4.5%–5.0%.

 

 

Amid yuan appreciation, Ma Ruichao, analyst at China Merchants Securities, argued that the yuan is embracing a historic window for internationalization. Steady progress in yuan globalization this year is also opening a repricing window for yuan-denominated assets.

 

He analyzed the drivers from four perspectives. First, at the top strategic level, China has adopted a more proactive stance toward yuan internationalization. The 15th Five-Year Plan outline proposes to “advance yuan internationalization, expand yuan usage in global trade, investment and financing, elevate capital account openness, build an independent and controllable cross-border yuan payment system, and develop offshore yuan markets”. Compared with the prudent approach stated in the 14th Five-Year Plan, the removal of the word “prudent” signals a strategic shift toward more proactive promotion.

 

Second, in infrastructure development, the Cross-Border Interbank Payment System (CIPS) has undergone comprehensive upgrades. Revised operational rules for CIPS took effect in February 2026, laying a broader foundation for yuan globalization. Driven by this reform, the system’s average daily trading volume surpassed 920 billion yuan in March, hitting a one-year high. By the end of March, CIPS connected 194 direct participants and 1,597 indirect participants, covering 191 countries and regions worldwide.

 

Third, cross-border settlement has seen robust yuan adoption, with the yuan’s share in Middle Eastern oil trade settlements rising to second place. In March, yuan settlements accounted for 41% of China’s crude oil imports from the Middle East, a historic high. For the first time, the yuan surpassed the euro, becoming the second-largest settlement currency in Middle Eastern oil trade behind the US dollar (52%). Currently, the yuan ranks as the world’s third-largest payment currency and China’s top currency for cross-border receipts and payments.

 

Fourth, yuan functions in investment and financing have been further enhanced. Panda bond issuance totaled 104.735 billion yuan from January to April 8, 2026, doubling year-on-year. Dim sum bond issuance exceeded 1.2 trillion yuan in 2025, setting an all-time record. In March alone, 157 dim sum bonds were issued, a monthly record high, with issuance volume reaching 150 billion yuan, up 180% year-on-year.

 

Chen Xingwen, chief strategy officer at Heiqiao Capital, projected that the yuan will likely trade in the 6.7–6.8 range against the US dollar throughout 2026. Historical data shows that every 0.1 appreciation in the yuan lifts equity valuations by 3% to 5%. The positive correlation between yuan appreciation and foreign capital inflows is expected to bring around 100 billion yuan of incremental capital into China’s A-share market in 2026. Amid a highly uncertain global landscape, China’s capital markets have emerged as a global safe haven for their relative stability. Frequent global geopolitical shifts aside, the valuation advantage of yuan assets, complete industrial supply chains and precise macro policy control combine to create irreplaceable allocation value for global investors.

 

Major global financial institutions have reached a consensus on yuan appreciation in 2026. Deutsche Bank forecasts the yuan will rise to 6.7 against the US dollar by year-end; Bank of America sees the rate at 6.8. UBS and Standard Chartered project a range of 6.9–7.05, while Morgan Stanley expects the yuan to end 2026 at 7.0 and accelerate to 6.8 in 2027.