The official currency of the People's Republic of China, also called the renminbi (RMB). The yuan trades in two forms: onshore (CNY) with managed exchange rates and offshore (CNH) with greater market freedom.
The Yuan in Forex
China's currency has two ISO 4217 codes: CNY for the onshore yuan traded within mainland China, and CNH for the offshore yuan traded in Hong Kong and other international markets. The People's Bank of China (PBOC) sets a daily reference rate (fixing) around which onshore CNY can trade within a +/-2% band.
Managed Float System
Unlike freely floating currencies, the yuan operates under a managed float. The PBOC uses the daily fixing, direct market intervention, and capital controls to influence the exchange rate. This makes yuan analysis different from other major currencies, as traders must assess both market forces and PBOC policy intentions.
The CNH (offshore) rate is market-determined and often diverges from the CNY (onshore) rate. The gap between CNY and CNH signals market expectations about future PBOC policy direction. A weaker CNH relative to CNY suggests markets expect depreciation that the PBOC has not yet allowed onshore.
Key Yuan Drivers
PBOC policy signals (especially the daily fixing), Chinese Gross Domestic Product (GDP) and trade data, U.S.-China relations, and Capital Flow dynamics are the primary yuan drivers. De-dollarization trends are gradually expanding the yuan's global role.
Related Terms
People's Bank of China
The central bank of China, responsible for monetary policy and managing the Chinese yuan (CNY/CNH), operating within a managed float exchange rate system with daily fixing rates.
U.S. Dollar (USD)
The official currency of the United States and the world's primary reserve currency. The USD is involved in approximately 88% of all forex transactions and serves as the benchmark against which all other currencies are measured.
Currency Peg
A fixed exchange rate policy where a country's central bank maintains its currency at a set rate against another currency (usually USD or EUR) through active intervention and reserve management.
Capital Controls
Government-imposed restrictions on the flow of money into or out of a country, including limits on foreign investment, currency conversion, and cross-border transfers.
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