SHANGHAI: China’s yuan advanced slightly against the dollar on Friday, on track for a seven-week rising streak – the longest since 2020 – as investors headed into the weekend on a cautious note and were reluctant to make any large bets.
The gains were also limited by a persistently weak central bank guidance fix, as analysts expect a gradual and choppy appreciation path ahead for the Chinese currency.
The onshore yuan was trading at 6.9832 per dollar at 0732 GMT, slightly stronger than Thursday’s close.
Markets barely moved after China released the December consumer price index (CPI) report which showed a 0.8% rise year-on-year to a three-year high, official data showed on Friday, although the full-year rate slumped to the lowest in 16 years while producer deflation persisted.
The yuan’s strong start to the year came after it rose more than 4% in 2025 – its biggest annual gain since 2020 – underpinned by a broadly weaker dollar and a year-end rush by exporters for foreign exchange settlement.
“Looking ahead, we still expect a gradual and choppy CNY appreciation path, with the USD leg remaining the key driver,” Goldman Sachs said in a report on Friday.
However, “recent policy communications signal a preference for a measured pace of appreciation,” the bank said.
“This would imply limited total returns for long CNY positions to contain one-way expectations.” On Friday, the People’s Bank of China set the midpoint rate at 7.0128 per dollar, nearly 300 pips weaker than Reuters estimate.
Setting a weaker benchmark fixing, around which the yuan is allowed to trade in a 2% band, would slow the currency’s appreciation.
He Wei, analyst at GavekalDragonomics, expected the yuan in 2026 to be “both stronger and more volatile against the dollar than it was in 2025”.
“A significant appreciation in the effective exchange rate probably first requires a material pick-up in domestic demand.”
American Dollar Exchange Rate