Archive · 12 Jan 2026
Yuan Optimism Grows as Hedging Costs Drop
The Chinese yuan is getting stronger, and it's becoming cheaper for investors to protect themselves from dollar losses.
This is because the yuan has gone up in value over the past year, and there are more dollars coming into China.
The Chinese government is also helping by setting stronger daily exchange rates.
Exporters are changing their dollars to yuan more often, and banks are helping with this by selling dollars.
Everyone seems to think the yuan will keep getting stronger.
Cost to hedge against dollar losses hits three-year low for Chinese yuan.
Yuan has strengthened 5% over the past 12 months, breaching 7 per dollar.
Dollar-yuan forwards imply a 12-month settlement rate of around 6.86.
Increased hedging activity with $109.8 billion in FX forward contracts in recent months.
Exporters are converting more dollars to yuan, supported by onshore banks.
- Who
- Mainland investors, exporters, People's Bank of China, onshore banks
- What
- Yuan strengthening, hedging costs dropping, increased hedging activity
- When
- Past 12 months, recent months, December, three months through November
- Where
- China, onshore banks, global currency markets
- Why
- Dollar weakness, China's trade surplus, improving economy, central bank's policy, Lunar New Year inflows
- Current 12-month forward rate
- 6.86 yuan per dollar
- Yuan's 12-month appreciation
- 5%
- Key yuan threshold breached
- 7 per dollar (since May 2023)
- FX forward contracts in 3 months through November
- $109.8 billion
- Exporters' hedging activity
- Increasing conversion of dollars to yuan