CNY Exchange Rate: U.S.-Iran Tensions Escalate Again

[Market Recap] In the previous trading session, the USD/CNY pair generally trended upward with volatility. On Thursday, onshore CNY closed at 6.7623 against the USD at 16:30, down 54 basis points from the prior session. The central parity rate for CNY against the USD was set at 6.8130, a depreciation of 34 basis points from the previous fixing. Onshore CNY closed the overnight session at 6.7728 against the USD. On Friday, the DXY index fell 0.08% to close at 100.75 in New York.

[Core Logic] Ongoing Israel-Lebanon geopolitical tensions continue to unsettle global market sentiment. Israel’s renewed strikes on Hezbollah and unexpected setbacks in U.S.-Iran talks in Switzerland have driven crude oil prices significantly higher, coinciding with a stronger U.S. dollar. In the near term, heightened U.S.-Iran geopolitical risks may provide intraday upside support for the dollar index; however, for the dollar to establish sustained upward momentum, this week’s PCE price data will be critical—if it substantially exceeds market expectations. The Chinese yuan remains under pressure from broad USD strength, with offshore CNY facing notable depreciation risks. Exporters should consider taking advantage of the current elevated USD/CNY exchange rate window by executing partial conversions in batches.

[Strategic Recommendations] In the short term, exporters are advised to selectively lock in forward conversions near the 6.82 level on rallies to mitigate potential losses from a subsequent CNY appreciation. Importers, meanwhile, could adopt a rolling spot purchase strategy around the 6.75 level.

[Key News]

1) Iran’s military announced on Saturday the closure of the Strait of Hormuz, citing enemy 'betrayal.' Tehran later stated the strait would remain closed if Israel continues its military operations in Lebanon; U.S. forces reported they had not observed any closure of the strait.

2) On Sunday, Trump said the U.S. might take control of the Strait of Hormuz and charge tolls if no deal is reached; he added that the U.S. would launch even more intense strikes if Iran does not halt its 'proxy' operations in Lebanon. Iranian media reported that Iran’s delegation walked out of the negotiation venue in protest against Trump’s threats, while U.S. media stated that Iranian negotiators are still engaging with U.S. counterparts; Iranian sources indicated that talks remain suspended.

3) The yen fell to 161, nearing a 40-year low, prompting Japan’s finance minister to reiterate that 'bold action will be taken.'

4) Burnham won a landslide victory in a UK parliamentary by-election, pushing his odds of succeeding as prime minister above 90%; cabinet ministers were reported to have urged Starmer to set a resignation date. British media reported that Prime Minister Starmer may announce his resignation on Monday.

Author: Nan Hua Research Institute, Pan Xiang (Registration No. Z0021448)

Important Disclaimer: The content and opinions in this article are for learning and reference purposes only and do not constitute any investment advice. The market carries risks, and investments should be made with caution.

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