PBOC Fixings Temper CNH Rally Near 6.98 Highs Now.

Introduction

The Chinese yuan has shown measured strength in the first weeks of January 2026, with the offshore yuan (CNH) trading near 6.98 per U.S. dollar. That advance reflects seasonal currency flows, improving risk appetite in Chinese equities, and growing data points that suggest policy support. At the same time, the People’s Bank of China (PBOC) has signalled a deliberate effort to manage the pace of appreciation via its daily midpoint fixing. This article breaks down the key drivers, central‑bank actions, and what traders should watch next.

What moved the yuan this week

Seasonal flows and corporate conversions

Exporters frequently rush to convert dollar receipts into yuan ahead of the Lunar New Year, creating a natural supply squeeze in USD and buying pressure for CNH. In early January, that dynamic contributed to CNH approaching multi‑month highs near 6.98. Think of it like a seasonal tide—regular timing, predictable amplitude—that lifts the onshore and offshore rates together when dollar selling intensifies.

PBOC midpoint fixings: a policy brake

The PBOC continues to use its daily fixing as a subtle policy tool rather than letting market moves run unchecked. On January 6, the central bank set the USD/CNY midpoint at 7.0173, noticeably weaker than market estimates near 6.9730. By anchoring the midpoint higher than models expected, the PBOC dampened intraday appreciation pressure and signalled a preference for stable, gradual moves rather than sharp strengthening.

Macro backdrop supporting a steady yuan

Credit stimulus and lending pickup

Recent data showed a jump in new bank lending in December 2025—estimates pointed to roughly 800 billion yuan, more than double the prior month—partly due to targeted policy‑financing tools aimed at infrastructure. That increase in credit supply can boost liquidity, support domestic activity, and ultimately underpin confidence in the currency as growth stabilizes.

Inflation and price signals

Consumer inflation has crept higher but remains modest: December saw headline CPI around 0.8% year‑on‑year, the strongest reading in some time but far from overheating. Producer price declines also moderated. The combination of mild inflation and stronger credit activity gives policymakers room to avoid abrupt monetary shifts while allowing the currency to appreciate gradually.

Analyst views and exchange‑rate outlook

Major banks and FX strategists have moved toward a constructive view on the yuan. Several forecasts project USD/CNY drifting into the mid‑6.8s over the next year—ING and others point toward a path to roughly 6.85–6.90—driven by yield differentials, trade surplus persistence, and expected US rate easing. For traders, that implies a managed appreciation scenario: upside for CNH but with recurring central‑bank interventions or signaling via the midpoint fixing.

Trading implications and watch list

• Monitor daily PBOC fixings: Deviations between the fixing and market rates often presage intraday flows and volatility.
• Seasonal liquidity windows: Expect stronger conversion flows around Lunar New Year; position sizing should reflect potential squeezes.
• Macro releases: Watch China’s monthly trade, new lending, and CPI/PPI prints for confirmation of the stimulus effect.
• Yield differentials: Shifts in US Treasury policy expectations remain a key external driver for USD/CNY direction.

Conclusion

The yuan’s recent strength is substantive but measured. Seasonal exporter conversions and improving domestic indicators have tightened CNH toward 6.98, yet the PBOC’s deliberate midpoint fixings are clearly designed to temper rapid moves. The most likely path is a gradual appreciation to the mid‑6.8s over 2026, with episodic volatility around policy communications and seasonal liquidity events. Traders should prioritize PBOC fixings, credit and inflation data, and shifts in US yields when positioning for the next leg of yuan movement.