At a press conference held by the State Council Information Office, Zou Lan, a spokesperson and Deputy Governor of the People's Bank of China, addressed the factors affecting the yuan's exchange rate.
He noted that geopolitical tensions have pushed up global energy prices this year, contributing to higher inflation worldwide and prompting shifts in monetary policy by some central banks abroad. In June, the U.S. Federal Reserve kept interest rates steady but signaled a hawkish stance, while the European Central Bank implemented a precautionary 25-basis-point hike. The Bank of Japan also raised rates, following its move last December. While international crude oil prices have retreated significantly from earlier highs, any future policy adjustments by major economies like the U.S. and Europe are expected to be relatively moderate. However, the recent complex and volatile situation in the Middle East introduces uncertainty regarding global inflation trends and the monetary policy directions of major economies.
Despite these challenging international conditions, the yuan's exchange rate has remained generally stable, exhibiting two-way volatility. Zou Lan reported that by the end of June, the yuan had appreciated by 3% against the U.S. dollar compared to the end of the previous year. Over the same period, the CFETS RMB Index, which tracks the yuan's value against a basket of currencies, rose by 4.7%. He attributed this performance to the forces of supply and demand in the foreign exchange market and growing market confidence in China's macroeconomic outlook. The yuan is currently trading around 6.8 per U.S. dollar, a level Zou described as roughly the median of its range in recent years.
Looking Ahead
Looking forward, a variety of factors will influence the yuan's exchange rate, with both upward and downward pressures at play, leading to expectations of continued two-way fluctuations. Internationally, heightened geopolitical risks and potential shifts in the monetary policies of major economies are key variables. Domestically, China's economic fundamentals remain solid and are improving, with high-quality development advancing steadily. The resilience of the foreign exchange market is strengthening, and market participants are becoming increasingly adept at managing exchange rate volatility. Data shows that in the first five months of this year, the proportion of enterprises engaging in foreign exchange hedging rose to 34.4%, an increase of 4.5 percentage points from 2025. Additionally, approximately 30% of cross-border trade settlements were conducted in yuan.
Central Bank's Stance
Zou Lan stated that the People's Bank of China will continue to closely monitor changes in the international economic and financial landscape. It will implement a moderately accommodative monetary policy to foster a suitable monetary and financial environment for sustained and high-quality economic growth. Furthermore, the central bank will uphold the decisive role of the market in determining the exchange rate, leverage the exchange rate's function as an automatic stabilizer for the macroeconomy and the balance of payments, and maintain the basic stability of the yuan's exchange rate at a reasonable and equilibrium level.
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