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Why UBS Sees US Dollar-Yuan Falling To 6.50 - USD/CNY Outlook - FX INSIGHTS
UBS expects further Yuan gains through mid-2027, with strong exports supporting the currency despite low inflation and an unfavourable rate gap.
The US Dollar to Chinese Yuan (USD/CNY) exchange rate closed Friday near 6.7083, extending a year in which the pair has fallen more than 4%.
UBS expects that decline to continue, forecasting 6.60 for December 2026 and March 2027, followed by 6.50 in June and September.
Reaching 6.50 would mean another 3.1% fall in USD/CNY, equivalent to approximately 3.2% appreciation in the Yuan's Dollar value.
The forecast also maintains the path discussed in our August analysis of UBS's Yuan outlook, when export conversions and the PBoC's tolerance for gradual appreciation were central to the argument.
Exports support the Yuan despite subdued inflation
Fresh Chinese trade figures strengthen the external-demand case.
Exports rose 25% year-on-year in Dollar terms during August, supported by overseas demand for high-tech and AI-related products.
Those receipts provide a potential source of Yuan buying when exporters convert foreign earnings, although the timing and scale of conversions matter.
Domestic prices tell a quieter story.
The National Bureau of Statistics recorded annual consumer inflation of just 0.8% in August, with food prices still 1.4% below a year earlier.
UBS forecasts Chinese growth of 4.5% this year and 4.6% in 2027, alongside average inflation of only 0.6% in both years.
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The US$/CNY forecast needs more than interest-rate support
UBS's Yuan call sits alongside expectations for higher US policy rates by December and a small reduction in China's policy rate by June 2027.
That would leave interest-rate differentials working against the Yuan over much of the forecast horizon.
Our reading is that export-related flows, broader Dollar weakness and continued policy tolerance must carry more of the appreciation argument.
The risk is that Beijing becomes less comfortable with currency strength if it starts squeezing exporters while domestic demand remains subdued.
A move towards 6.60 would keep UBS's year-end forecast on course, but reaching 6.50 requires those supports to endure into 2027.
