The offshore yuan is holding around 6.70 per U.S. dollar as improving Chinese economic data and additional policy support strengthen confidence in the domestic growth outlook. The latest official PMI figures show China’s composite activity index rising to 50.7 in September, moving further into expansion territory and reaching its highest level since December 2025.

The improvement is becoming broader across the economy. Official manufacturing PMI increased to 50.1 from 49.8, while the non-manufacturing index rose to 50.2 from 49.0. Manufacturing production accelerated to 51.7, while new orders remained above the 50 threshold at 50.5, indicating that industrial activity and domestic demand are showing signs of stabilization.

At the same time, policymakers are expanding targeted support for housing, infrastructure, technology, agriculture and private businesses. The combination of better economic indicators and additional financial support is creating a more constructive backdrop for the yuan, although the currency remains sensitive to the relative strength of the U.S. dollar and China’s still uneven domestic recovery.

Market Snapshot

Offshore Yuan Price Action

The offshore yuan is holding close to 6.70 per dollar, with CNH recently strengthening to around 6.7080. The currency is also approaching a seventh consecutive quarter of gains against the dollar, highlighting the broader appreciation trend that has developed during 2026.

The immediate technical backdrop remains constructive while USD/CNH holds below the recent higher levels. Continued exporter conversions and stronger domestic economic indicators could provide further support, although the yuan’s appreciation path is unlikely to be one-directional.

China Manufacturing Returns to Expansion

China’s official manufacturing PMI has moved back above the 50 threshold, reaching 50.1 in September from 49.8 previously. Production was particularly strong, rising to 51.7, while new orders remained in expansion at 50.5.

The improvement matters for the yuan because stronger manufacturing activity can support corporate revenues, trade flows and confidence in China’s growth trajectory. However, smaller companies remain weaker, with the PMI for medium-sized firms at 49.7 and small firms at 48.9, showing that the recovery is not yet evenly distributed across the economy.

Services and Domestic Activity Improve

The non-manufacturing PMI increased to 50.2, with both construction and services returning to expansion. The services activity index reached 50.2, while construction rose to 50.3. New orders also improved, although the non-manufacturing new-orders index remained below 50 at 46.5.

This combination suggests that activity is improving, but demand remains less convincing than headline activity measures. For the yuan, sustained improvement in domestic demand would provide a stronger foundation for appreciation than production gains alone.

Fresh Policy Support Adds to Yuan Confidence

Chinese authorities are introducing additional targeted measures to support growth and the property market. These include lower-cost pledged supplementary lending, increased relending support for technology and equipment upgrades, additional financing for agriculture and small businesses, and interest subsidies for eligible first-home mortgage loans.

The measures increase the likelihood that policymakers will continue supporting economic activity if domestic demand remains weak. For the yuan, the immediate effect is supportive because policy stabilization reduces some downside pressure on growth expectations.

However, additional stimulus can also increase expectations for easier monetary and financial conditions. That means the currency response will depend on whether stronger growth confidence outweighs concerns about additional liquidity and potential interest-rate differentials with the United States.

Exporter Dollar Conversions Support CNH

Exporter flows are providing another source of near-term support for the yuan. Chinese exporters are converting more of their dollar receipts into yuan ahead of the National Day holiday, increasing demand for the domestic currency.

This flow can become particularly important when combined with improving economic sentiment. If exporters continue to convert foreign-currency revenues rather than retain large dollar balances, USD/CNH could face additional downward pressure.

U.S. Dollar Remains the Main External Risk

The yuan’s domestic backdrop has improved, but CNH remains heavily influenced by the broader U.S. dollar cycle. A stronger dollar driven by higher U.S. Treasury yields or expectations for tighter Federal Reserve policy could limit yuan appreciation even if Chinese economic data continue improving.

The dollar has recently strengthened against several major currencies as U.S. yields remain elevated, leaving the yuan vulnerable to renewed external dollar demand.

Bullish Sentiment

1. Composite PMI returns to stronger expansion: China’s official composite PMI rises to 50.7, providing evidence of improving overall business activity.
2. Manufacturing crosses back above 50: The manufacturing PMI reaches 50.1, while production accelerates to 51.7.
3. Policy support is expanding: Housing, infrastructure, technology, agriculture and private-sector financing are receiving additional support.
4. Exporter conversions increase yuan demand: Conversion of dollar receipts into yuan ahead of the National Day holiday provides an additional near-term flow.
5. Longer-term appreciation trend remains intact: CNH is approaching a seventh consecutive quarterly gain against the U.S. dollar.

Bearish Sentiment

1. The U.S. dollar remains firm: Continued dollar strength could restrict further yuan appreciation.
2. Domestic demand remains uneven: Non-manufacturing new orders remain below the 50 threshold despite the improvement in headline activity.
3. Smaller manufacturers remain in contraction: Medium-sized and small-company PMI readings remain below 50.
4. Property-sector weakness persists: The introduction of mortgage subsidies highlights the continuing need for support in China’s housing market.
5. Policy easing can create currency complications: Additional financial support may improve growth while simultaneously reinforcing expectations for accommodative monetary conditions.

Price Forecast: What Traders Are Watching

The immediate focus for USD/CNH is whether the yuan can maintain its position around the 6.70 area as the improvement in Chinese economic data is tested against continued dollar strength.

A sustained move below 6.70 would put greater emphasis on the yuan’s broader appreciation trend and could encourage additional exporter conversions. Conversely, a recovery above 6.70 would indicate that dollar demand remains strong enough to offset improving Chinese fundamentals.

The next major signal will be whether stronger PMI readings translate into sustained improvement in domestic orders, consumption and private-sector activity. A more convincing improvement across those areas would provide a stronger fundamental basis for further yuan gains.

Supply Outlook

The supply of yuan in the foreign-exchange market will remain influenced by exporter conversion patterns, corporate dollar holdings and central-bank liquidity conditions.

Near-term exporter conversions could keep yuan liquidity relatively well supported, particularly around the National Day holiday. At the same time, additional policy financing means liquidity conditions will remain an important consideration for CNH pricing.

Demand Outlook

Demand for the yuan is being supported by improving economic activity, stronger manufacturing production and increased expectations that policy measures will stabilize domestic growth.

The critical question is whether this demand develops into a sustained trend after the holiday period. If domestic activity continues improving while exporter dollar conversions remain elevated, demand for CNH could remain firm.

Market Outlook for the Coming Sessions

The offshore yuan enters the next phase with several supportive domestic factors working in its favour. The return of manufacturing to expansion, stronger services activity and additional targeted policy support are improving the economic backdrop.

However, the currency still faces a powerful external variable through the U.S. dollar. The next move in USD/CNH is therefore likely to depend on the relative speed of China’s economic stabilization versus changes in U.S. interest-rate expectations.

Traders will be watching whether CNH can remain below the 6.70 area and whether the improvement in Chinese activity continues into the next round of economic indicators.

Currency Hedger View

The offshore yuan’s recent strength highlights the importance of monitoring both Chinese economic conditions and the wider U.S. dollar cycle when managing CNY exposure.

For businesses receiving U.S. dollars and paying suppliers or operating costs in yuan, continued CNH appreciation can change the value of future conversions and alter purchasing costs. Conversely, companies with yuan revenues and dollar expenses remain exposed to a different set of currency movements.

Currency Hedger helps businesses and individuals manage international currency requirements while understanding the wider market forces influencing exchange rates.

Analysis Louis Roche – Today Markets

The yuan is entering the next stage of its 2026 appreciation trend with improving domestic economic indicators providing a stronger fundamental foundation. The return of China’s manufacturing PMI to expansion, combined with higher services activity and additional targeted policy support, gives the currency a more constructive domestic backdrop.

The key test now is whether improving sentiment develops into stronger underlying demand. If economic activity continues to stabilize while exporter dollar conversions remain strong, the yuan could retain support. The principal counterweight remains the U.S. dollar, particularly if elevated U.S. yields continue to attract global capital.

For USD/CNH, the 6.70 area therefore remains an important reference point as markets assess whether China’s improving growth signals can continue to translate into sustained yuan strength.

Louis Roche – Today Markets