【RMB Outlook】Citi experts expect the RMB to challenge 6.8; the most bullish view targets 6.7 by the end of the year, with a potential increase of 3%

▲ First quarter RMB rises about 1%

Refer to the chart 👇👇👇👇 for the yuan and U.S. interest rate outlook

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The moment the second quarter begins, the onshore yuan (CNY) is at 6.8749. With the Middle East crisis showing a faint glimmer of hope, but in March, amid a strong U.S. dollar and the People’s Bank of China stepping up measures to rein in the upward momentum, the onshore rate closed in Asia yesterday (March 31) at 6.9081, bringing the full month down by 0.7%. However, the first quarter still recorded an increase of about 1.2%.

The yuan exchange rate trend hinges on the U.S. dollar and U.S. interest rates. In the first quarter, the U.S. Dollar Index is roughly ranging between 96 and 100. At the end of February, the U.S. suddenly launched attacks on Iran, and safe-haven funds poured into the U.S. dollar. The market widely expects that, with the U.S. midterm elections approaching, the dollar’s upward track is likely to continue. Still, the yuan also has resilience against declines, and it is expected to maintain a steady course while making progress.

On the topic of the medium to short term, because the U.S.-China leaders—U.S. President Trump and Xi Jinping of China—will meet in mid-May, China may be inclined to continue maintaining yuan exchange-rate stability during the period. It is expected to fluctuate around 6.8 to 6.9, to avoid U.S. dissatisfaction with yuan depreciation in hopes of supporting exports. Moreover, the U.S.-China interest-rate differential and China’s domestic economic fundamentals may not provide strong appreciation momentum.

Starting from March 2, the People’s Bank of China reduced the foreign-exchange risk reserve requirement ratio (RRR) for the forward sale of FX from 20% to 0%. The aim is to cool the heat of yuan appreciation speculation. As a result, the yuan rate fell back from the 6.8 high to around 6.9.

JPMorgan + UBS both expect the yuan to return to 6.7 by year-end

Currently, Citigroup expects the yuan in the short term to trade around 6.8 to 6.85. As for the year-end target price, JPMorgan, UBS, and Switzerland’s private bank Union Bancaire Privée (UBP) all expect it to return to 6.7, implying about 3% potential upside from the current level of around 6.9.

Expert forecasts for the yuan:

*Li Ruofan, DBS Hong Kong Global Markets strategist, expects the offshore rate (CNH) to range between 6.8 and 6.83: The Federal Reserve is expected to cut rates twice in the second half of the year, and the DXY is expected to stay in the 98 to 102 band. The performance of the FX market in the second quarter mainly depends on developments in the Iran conflict. If the U.S.-Iran war continues, the Australian dollar or Canadian dollar—driven largely by energy exports—could have a chance to outperform. It is believed the yuan will also receive support because mainland China can better withstand an energy crisis, and the Singapore dollar can also be viewed as a regional safe-haven currency. However, given the strength of the U.S. dollar, the above foreign currencies only have better downside-resilience. Conversely, once the Gulf conflict ends, the dollar is expected to soften. Looking at the short term, it is expected that the AUD/USD will return to the 0.71 to 0.72 range; the offshore yuan is expected to stay around 6.8 to 6.83

*Zhang Haonen, Head of Investment for Individual & Business Banking, Citibank (International), expects the offshore rate to test 7 within the year: The Fed kept the policy rate range at 3.5% to 3.75% unchanged for the second consecutive time at its March meeting, and it also raised its forecasts for 2026 GDP growth and core inflation. Meanwhile, its unemployment rate and median interest-rate forecasts were kept consistent with those from last December. Overall, this meeting shows the Fed maintains a relatively optimistic view of the U.S. economic resilience, but it still remains cautious about inflation risks that could be triggered by oil prices. On the other hand, the market is worried that if the Middle East conflict persists, it could prevent the Strait of Hormuz from operating normally, which may drag the global economy into a recession. Against this backdrop, in the short term the dollar remains supported by safe-haven demand and the relative strength of the U.S. economy, keeping it relatively strong. However, if the Middle East conflict evolves into a longer duration, the U.S. economy may also find it hard to stand apart; whether it leads the Fed to cut rates further to rescue the economy and push the dollar lower will require more time to observe. Conversely, if concrete progress is achieved in U.S.-Iran negotiations in the near future, risk appetite may rebound and capital could flow back into high beta assets. In addition, with the U.S. having a large fiscal deficit, along with factors such as “de-dollarization,” the dollar’s upside room will still be limited. The DXY’s forecast for the rest of the year ranges from 94.5 to 104.5. And under safe-haven sentiment, with the dollar relatively resilient, among major non-U.S. currencies it is expected that the yuan will be relatively stable in the second quarter. The forecast for the USD/CNH for the rest of 2026 ranges from 6.7 to 7

*Ding Meng, Chief Economist at Citibank (International): China’s 2026 Government Work Report continues to propose a moderately loose monetary policy. At the same time, the local GDP growth target is set at 4.5% to 5%. Considering the impact of the overall economic environment and the strength of fiscal policy on economic growth, it is expected that mainland China will continue to cut rates once more this year, with a magnitude of 10 basis points.

The Middle East situation is changing quickly. Based on potential changes in energy and food prices, the forecast for the Fed to cut rates twice this year, totaling 50 basis points, is kept unchanged. But if the conflict lasts longer than a month and leads to continued increases in energy prices, then the Fed may only cut rates once this year, with a magnitude of 25 basis points

*Liao Jiahao, Head of Investment Strategy and Asset Allocation at Citibank, expects the PBOC to delay rate cuts until the second half: The USD/CNY onshore might test 6.8 to 6.85. At present, the urgency for China to roll out supportive fiscal policies is relatively lower. However, PPI remains positive and is trending upward, which may lead the People’s Bank of China to postpone rate cuts until the second half of 2026

*JPMorgan Private Bank expects the offshore rate to reach 6.7 by year-end: As the USD/CNH falls below the previously forecast range of 6.9 to 7.1, it reassesses the outlook for the offshore rate. Although the earlier upswing driven by seasonal factors has ended, from a medium-term perspective there is still potential for a mild appreciation from current levels, and the year-end forecast is raised to 6.7 (range value 6.6 to 6.8). Mainland China’s strong exports are expected to keep supporting China’s balance of payments and further strengthen the fundamental picture of the offshore yuan. At the same time, the PBOC appears to tolerate yuan appreciation gradually, showing higher tolerance

*UBS expects the onshore rate to return above 6.8 in the next quarter: Calculated using trade-weighted shares, the yuan exchange rate is still relatively low. Combined with a large trade surplus, this will prompt more corporates and investors to continue to sell the U.S. dollar and buy the yuan. Raising the onshore yuan forecast: June is expected to be 6.8 (previously 6.9), September 6.75 (previously 6.8), and December 6.7 (previously 6.8)

*Bank of America expects mainland China will not need rate cuts this year: With demand improving, it has canceled its prior forecast of two rate cuts totaling 20 basis points for mainland China this year. It also raised its forecasts for this year’s mainland CPI and PPI. Based on the oil price benchmark in mid-March, the CPI forecast is raised to 0.7% (from 0.1%); the PPI outlook is raised to 0.3% (from -0.7%)

*HSBC Global Research expects the yuan to face challenges at 6.78 in the third quarter: The Fed’s forecasts for USD/CNY onshore in the second, third, and fourth quarters are 6.8, 6.78, and 6.75 respectively. The internationalization of the yuan, the long-term move toward diversification away from the U.S. dollar, and economic rebalancing are the main structural themes supporting the yuan this year. Even if geopolitical volatility persists, the nominal effective exchange rate for the yuan (CNY NEER) and the CFETS yuan exchange-rate index are still expected to remain strong

*UBP expects the yuan to move toward a 10-year bull market: It places the yuan as one of its best-liked investment targets, forecasting the yuan will rise to 6.7 by year-end. As Beijing pushes to enhance the yuan’s international status and advances economic rebalancing, the yuan will strengthen. With support from fundamentals and policy reforms, the yuan will enter a bull market lasting as long as 10 years

*OCBC Oversea-Chinese Banking Corporation (Hong Kong) economist Hui Wang Haoting: The yuan’s target for the second quarter is 6.84, with an end-year forecast of 6.8. There are no signs that the situation in the Iran-U.S. war will ease. Asian currencies continue to face downward pressure, and the offshore yuan has fallen below the 50-day moving average line versus the U.S. dollar. What’s worth watching is that recent oil price increases might delay market expectations for further rate cuts in China. However, mainland China’s sensitivity to the impact of recent oil prices is relatively low; China policy makers are expected to have more flexibility in policy than other regional economies. Looking ahead, the yuan’s performance may be more resilient than other Asian currencies. In the next two weeks, it is expected to trade between 6.8 and 6.97 (against the Hong Kong dollar between 1.1246 and 1.1527)

*Winson Wen, Chief Economist and Strategist at New Frontier Financial Group, expects the yuan to test 7.1 this year: This year the USD/CNY is expected to fluctuate between 6.7 and 7.1, and it is expected that mainland China will cut interest rates and RRR by at most once each within the year. However, it may be affected by the Middle East war and oil price volatility

*StanChart Wealth Solutions Chief Investment Office: Expected offshore yuan rises to 6.8 in three months, and rises to 6.75 in 12 months

Deutsche Bank says Iran conflict may give rise to “oil yuan”

In addition, Deutsche Bank says the Iran war may give rise to an “oil yuan”: citing Bloomberg that Deutsche Bank said the Iran war is testing the status of the U.S. dollar as the pricing currency for global oil trade, and its long-term impact could be more transactions shifting to the use of the renminbi. This conflict could become a catalyst for weakening the dominant position of the “petrodollar” and for the rise of “oil yuan,” because Iran allows ships to pass through the Strait of Hormuz on the condition that oil payments are made in RMB. China is Iran’s long-term cooperation partner and also Iran’s largest oil customer.

If the “petrodollar” system further breaks down, it could have major knock-on effects on the dollar’s use in global trade and savings, and on its position as the world’s reserve currency. At the same time, China is also accelerating yuan internationalization to challenge the dollar’s dominant position in global trade and finance.

The “petrodollar” mechanism dates back to 1974, 52 years ago. At that time, Saudi Arabia agreed to price oil in U.S. dollars and invest its surplus in dollar assets in exchange for the security guarantees from the White House. However, Saudi Arabia’s oil export volume to China is four times that to the United States.

“Petrodollar” mechanism: Half a century ago established U.S. dollar hegemony

According to an analysis of foreign media, before the outbreak of the Iran-U.S. war, an average of more than 20 million barrels of oil per day had to pass through the Strait of Hormuz, accounting for two-thirds of the total oil production in the Middle East each day; it also accounted for more than one-fifth of global daily oil consumption. In addition, the Gulf region is also a major export hub for chemical fertilizers, affecting one-third of the global fertilizer shipping and trading, including 30% of urea and 20% of ammonia, which must pass through the Strait of Hormuz to be exported—crucial to the stability of the global food supply.

Iran has recently resumed operational management of oil tankers passing through the Strait of Hormuz. One condition for allowing some tankers to pass is that crude oil transactions must be settled outside the dollar and priced in RMB. Even if this move is still unlikely to challenge the dollar’s reserve currency status in the short term, to ensure oil supply it is believed more economies will try to accept the oil yuan scheme. With the petrodollar system ruling for more than half a century, that dominance has long been due to the dollar system

Finally, one more thing: remember, a year ago, in April last year, the onshore rate briefly appeared at 7.3512 and set a new low after the exchange-rate reform. At the time, Trump wielded the tariff whip, and on April 2 “Liberation Day,” he declared war on the world with retaliatory tariffs. Foreign investors’ most bearish predictions were that the yuan might “break 7 into 8,” entering the “8 era.” But thereafter, amid “de-dollarization” and trading on rate-cut expectations, the U.S. dollar index plunged 9% last year, the yuan unexpectedly gained 4.4%, and by year-end it recovered the “seven” level.

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