China CFETS RMB index rises 0.77 point on week

China CFETS RMB index rises 0.77 point on week

China CFETS RMB Index Rises 0.77 Points on Week Amid Policy Adjustments and Export Strength

The China Foreign Exchange Trade System (CFETS) RMB Index rose by 0.77 points week-on-week as the yuan continued to benefit from robust export performance and evolving monetary policy signals. The index, which tracks the RMB's value against a basket of trade-weighted currencies, reflects growing confidence in China's external sector amid global economic shifts.

The onshore yuan (CNY) has shown resilience, ending a 10-session winning streak on March 1, 2026, after the People's Bank of China (PBOC) removed a 20% reserve requirement on foreign-currency forward contracts. This policy adjustment aimed to curb rapid appreciation by lowering the cost of shorting the yuan, while also signaling the central bank's preference for a "reasonable and stable" exchange rate. Despite the pullback, the CNY remained near multi-year highs against the U.S. dollar, supported by strong foreign-exchange conversion and a broader weakening of the greenback.

Bank of America (BofA) revised its USD/CNY forecasts to 6.7 for end-Q3 and Q4 2026, citing sustained yuan strength driven by export momentum and tighter monetary policy in China. The bank also highlighted spillover effects, with emerging market currencies benefiting from the yuan's ascent. Meanwhile, the EUR/CNY rate reached a decade high, though near-term downside risks persist due to China's export diversion to Europe and widening EU trade deficits.

The PBOC's intervention strategies, including daily reference rate adjustments and forward guidance, underscore its dual objective of managing exchange rate stability while addressing trade tensions. Recent measures, such as setting a record-weaker reference rate on March 1, signal a preference for slowing appreciation without derailing long-term gains. Analysts note that a stronger yuan could help rebalance China's economy but risks pressuring exporters amid lingering domestic demand challenges.

Looking ahead, currency markets remain focused on whether the PBOC will further adjust tools to manage volatility, as the yuan's trajectory continues to influence global trade dynamics and capital flows.