USD/CNY is holding within a 6.70-6.72 range after touching a four-year low of 6.6935 on September 21. China is balancing trade relations with Washington and Brussels against renewed Fed and ECB tightening, global bond market volatility driven by US and French fiscal sustainability concerns, domestic growth considerations, and its ambition to internationalise the CNY.
The September 24-25 summit between US President Donald Trump and Chinese President Xi Jinping in Washington yielded a tangible outcome: an extension of the existing bilateral trade truce from November 10 to January 10. The CNY has appreciated 9.7% against the USD from its April 2025 peak, spanning the two trade truces reached in May 2025 and October 2025. The two leaders are scheduled to meet again at the APEC Economic Leaders’ Summit (Shenzhen) on November 18-19 and the G20 Leaders’ Summit (Miami) on December 14-15.
Attention has shifted to Beijing, where EU Trade Commissioner Maros Sefcovic and Chinese Commerce Minister Wang Wentao are holding a two-day summit on October 8-9 to address Europe’s trade deficit with China. Brussels fears that US-China trade truces and US tariffs could divert Chinese exports and industrial overcapacity towards Europe’s open markets, threatening its domestic industries. German Chancellor Friedrich Merz has argued that the CNY is undervalued by 25-30%, compared to the IMF research estimate of 15-16%. However, Europe’s argument that China is relying on currency depreciation to sustain its export competitiveness has become harder to maintain following the CNY’s 12.7% gain against the EUR since July 2025.
The People’s Bank of China has pushed back against the premise that China’s export success is primarily exchange-rate driven. In its October 8 statement, the central bank reaffirmed its commitment to market forces and two-way currency flexibility, rejecting competitive devaluation. Fixing global imbalances requires all stakeholders to work together, rather than shifting the blame for lost factories, high debts, and a lack of industrial competitiveness onto another country’s currency value. France and Germany are pushing to give the European Commission more power to respond to trade aggression, a key agenda at the European Council Summit on October 15-16.
China has reasons to resist excessive CNY depreciation and stronger reasons to avoid excessive appreciation in the short term. The rolling two-month extension of the US-China trade truce and the EU’s trade rebalancing talks in Beijing have capped near-term CNY volatility. USD/CNY’s support around 6.70 also reflects the Fed’s and ECB’s tightening bias to bring inflation back to target, the stress in the US and French bond markets, and China’s domestic growth priorities. Beijing’s ambition to internationalise the CNY further reinforces the importance of exchange-rate credibility by keeping it broadly stable at a reasonable and balanced level.
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