The dollar-yuan exchange rate broke below 6.9 yuan per dollar. It is the first time in about three years since April 2023. Local experts said the impact of a weaker dollar is limited, and analyzed that expectations for the Chinese economy, such as a recovery in Lunar New Year (Chunjie) consumption ahead of the "Two Sessions" (National People's Congress of China and Chinese People's Political Consultative Conference), were reflected.
According to Chinese business outlet Caixin on the 26th, on the 25th the onshore foreign exchange market closed with the dollar-yuan spot at 6.8672 yuan per dollar. That was 0.0177 yuan lower than the previous trading day, meaning the yuan strengthened by that amount. Compared with the last trading day before the Lunar New Year holiday, it was an appreciation of 0.0442 yuan. The offshore yuan exchange rate also broke through 6.87 yuan. After 10 a.m. the previous day, the offshore yuan fell to the 6.867 yuan level, showing strength, and in the afternoon it dropped to around 6.86 yuan, hitting a record high for the past three years.
The yuan exchange rate is maintaining its pre-Lunar New Year strengthening trend. The yuan has risen 1.7% so far this year. While external factors include a weaker dollar, the dollar index (DXY), which measures the dollar against major currencies, has fallen only about 0.6% over the past two months. Accordingly, rather than a relative rise due to dollar weakness, analysis suggests the yuan itself is strengthening due to endogenous factors.
Caixin cited improved expectations for the Chinese economy as the backdrop. First, there is a possibility that the pressure from U.S. tariff policy on the Chinese economy will ease. China posted a record trade surplus last year even amid a tariff war with the United States. Despite an unstable external environment, it managed to offset weak domestic demand with exports and recorded 5% economic growth, while a recent ruling by the U.S. Supreme Court invalidated tariff measures imposed by the Trump administration based on the International Emergency Economic Powers Act (IEEPA), introducing a new variable into the global trade order.
Zhao Wei, chief economist at Shenwan Hongyuan Securities, said, "The tug-of-war over tariffs will enter a new stage," adding, "Tariffs themselves will remain in place in the long term, but in the short term there is a possibility that U.S. tariff rates will be reduced in part."
Some view this Lunar New Year's spending figures as the first signal of a domestic demand recovery. They say spending across sectors increased meaningfully from a year earlier. According to state-run Xinhua News Agency, during the first four days of this year's Lunar New Year holiday, retail and dining rose 8.6%, sales in major commercial districts rose 4.8%, and domestic tourism spending increased 4.5%. In particular, Hainan duty-free sales jumped 15.8% from a year earlier.
Lu Zhe, chief economist at Dongwu Securities, said, "Lunar New Year consumption signaled a good start for this year's economy," and projected, "Early-year consumption is expected to show a gradual recovery, and the growth rate of total retail sales of consumer goods in January–February 2026 will also improve markedly from about 1% at the end of 2025."
Caixin projected that these signs of economic recovery will stimulate demand for the yuan and support a long-term strengthening of the currency. Caixin said, "In fact, in December banks' client-facing settlement and sales surplus in goods trade hit an all-time high of $111.3 billion (about 159 trillion won), and in January this year they still posted a surplus of $76.1 billion (about 108 trillion won)." This means the amount of foreign currency that corporations and individuals sold to banks to convert into yuan exceeded the amount of foreign currency they bought. According to the report, in the same month, banks' client-facing settlement and sales surplus in the securities category also exceeded twice the previous month at $25.9 billion (about 37 trillion won), hitting a record high.