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The Chinese yuan is expected to strengthen against the US dollar in the near term, with the USD/CNY exchange rate likely to trade in the range of 6.656.70, although elevated US bond yields, renewed trade restrictions and weakening domestic confidence could pose risks to its appreciation, according to a report by ICICI Bank.
The lender noted in its report, China's widening trade surplus is supporting foreign currency inflows and providing stability to the yuan against the US dollar. "However, currency appreciation could be limited by weak domestic demand," it said. As per the report, People's Bank of China (PBC) may also seek to prevent excessive strengthening of the yuan to maintain the competitiveness of Chinese exports in international markets. Meanwhile, continued stability in US-China trade relations could support further appreciation of the yuan, leading to a decline in the USD/CNY exchange rate. "We expect USD/CNY to remain in the range of 6.65 to 6.70," it said. At the time of reporting, the USD/CNY was trading at around 6.6680. China's trade surplus narrowed in October 2026 as imports grew faster than exports, despite continued strong overseas demand for Chinese goods. Export growth moderated to 35.2 per cent year-on-year, although it remained above market expectations of 33.5 per cent. Meanwhile, imports surged 41.6 per cent, significantly exceeding the anticipated growth of 32 per cent. "The trade surplus narrowed to USD 105.5bn, much lower than USD 134bn last month," the report said, highlighting that "Export performance remained stellar reflecting robust overseas demand, particularly for technology products, semiconductors and advanced manufactured goods." The report further noted that the growing investment cycle in artificial intelligence (AI) is emerging as an important driver of China's trade performance, particularly through a sharp increase in integrated circuit exports. China's cumulative trade surplus reached USD 1.04 trillion during the first ten months of 2026, reflecting continued strength in its external trade sector. "Octobers trade data continue to showcase the strength of Chinas external sector that continues to be driven by manufacturing competitiveness and technology driven export demand," it added. (ANI)
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