On March 4, 2026, the exchange rate of the Chinese Yuan against the US Dollar (USDCNY) fell for the fourth consecutive day, reaching 6.912, marking a three-week low. On that day, market trading volume exceeded 67 billion dollars, setting a new historical high. This trend in the Yuan was influenced by the strong rebound of the dollar, which was primarily driven by ongoing tensions in the Middle East.
Dollar's Strong Rebound Pressures Yuan
According to Reuters data, the Yuan's central parity rate saw a slight decline of 36 points on that day, weaker by about 70 points compared to the market expectations. Market analysts said that the persistent strength of the dollar, having exceeded a three-month high, has exerted downward pressure on the Yuan and other non-US currencies. Although the recent fluctuations of the Yuan against the dollar have been dominated by external factors, the market generally believes that if geopolitical risks ease, the Yuan might appreciate again.
External Factors Affect Yuan Adjustment
Traders from Chinese banks indicated, "The recent adjustment of the Yuan is mainly influenced by external factors. If the situation in the Middle East gradually eases, the Yuan may still rebound." However, due to large-scale market sell-offs and the pressure of deleveraging, the short-term trend of the Yuan will still be constrained by the dollar's strong rebound.
Malayan Banking mentioned in its report that the current market sentiment has worsened under the influence of the Middle East situation. Despite the increased demand for safe-haven assets, the resilience of some of these assets is being challenged by significant market volatility. The bank believes that once the market situation improves, Asian currencies, including the Yuan, may still experience a rebound.
Potential Impact of China's National People's Congress on Yuan's Trend
In addition to geopolitical uncertainties, the market will also focus on the upcoming session of China's National People's Congress. During this session, the Chinese government is expected to announce important economic policies, including the economic growth target for 2026, which could impact the Yuan's exchange rate trend.
