Top Chinese Economist Predicts Yuan to Strengthen Past 7 Against Dollar Amid Trade Deal Speculation

The yuan may strengthen past 7 against the dollar due to US economic weakness, Federal Reserve rate cuts, and a broader erosion of confidence in the dollar, according to Bank of China International Securities' Guan Tao. The onshore yuan has gained only 1.6% this year despite the dollar's 8% decline, sparking speculation over policy intent. Several institutions have raised their forecasts for the yuan to approach 7 per dollar, citing optimism for a US-China trade deal.

The yuan may see further gains past 7 against the dollar, according to a top Chinese economist, Guan Tao, from Bank of China International Securities. This prediction comes amidst growing debate among market participants over whether Beijing will allow the yuan to appreciate [2].

Several scenarios could push the yuan higher, including US economic weakness, Federal Reserve rate cuts, and a broader erosion of confidence in the dollar. Guan Tao also cited the prospect of a second US-China trade deal, similar to the one struck during President Donald Trump’s first term, as a potential boost for the yuan [2].

Despite the dollar's decline of about 8% this year, the onshore yuan has gained only 1.6%. This underperformance has fueled speculation over whether it signals policy intent, even as officials in Beijing insist they aren’t seeking a competitive edge through depreciation [2]. Several institutions, including Deutsche Bank AG, UBS Group AG, and the Toronto-Dominion Bank, have raised their forecasts for the yuan to approach 7 per dollar, citing optimism that the US and China will eventually land on a trade deal [2].

The offshore yuan last reached levels stronger than 7 per dollar in September 2024 and has been trading around 7.18 this week [2]. Guan Tao said the yuan could rise beyond that level if conditions align, while rejecting the idea that Beijing is deliberately weakening the exchange rate to prop up exports [2].

Guan cautioned that markets may be too complacent about downside risks. The US and China may have extended their trade truce by 90 days, but tough negotiations could still reignite frictions and put the currency back under pressure [2].

References:
[1] https://www.xe.com/currencyconverter/convert/?Amount=1&From=CNY&To=USD
[2] https://www.bloomberg.com/news/articles/2025-08-18/yuan-may-strengthen-past-7-per-dollar-top-china-economist-says
[3] https://www.tradingview.com/news/reuters.com,2025:newsml_L4N3U408R:0-yuan-steady-as-china-us-trade-extension-gives-economy-more-breathing-room/