USD/CNH remains stable near the midpoint of a two-month range due to China’s October trade data, which reveals soft exports and weak domestic demand. The currency is trading between 7.0900-7.1500. Over the last year up to October, China’s trade surplus reached $1168 billion, slightly down from September’s $1173 billion. The trade surplus with the US now stands at $448 billion, a near five-year low.
October exports fell by 1.1% year-on-year, against the expected growth of 2.9%, following an 8.3% rise in September. Imports increased by 1.0% year-on-year, compared to the 2.7% consensus and a 7.4% rise in September. This weak import growth emphasises ongoing domestic demand issues.
Potential Currency Revaluation
China might consider gradually revaluing its currency, potentially boosting consumer spending by increasing disposable income through cheaper imports. Overall, USD/CNH could potentially move lower.
Given the weak October 2025 trade figures, we see the USD/CNH pair trading sideways within its recent 7.0900-7.1500 range. The surprise fall in exports and sluggish import growth confirm that China’s domestic demand remains soft. This view is supported by the latest Caixin Manufacturing PMI which, at 49.8, has dipped back into contraction territory for the first time in five months.
This economic softness suggests authorities may favor a stronger yuan to make imports cheaper and help stimulate consumer spending. We believe a gradual appreciation of the currency is a policy tool they are considering, which points to potential downside for USD/CNH. The People’s Bank of China has already signaled its easing bias with a recent 25 basis point cut to the Reserve Requirement Ratio just last month.
On the other side of the pair, the US Federal Reserve has clearly signaled a pause in its rate hiking cycle, easing the upward pressure that has supported the dollar for much of the past few years. Recent US inflation data from October 2025 came in at an annualized 2.9%, reinforcing market expectations that the Fed’s next move is more likely a cut than a hike. This creates a favorable environment for non-dollar currencies, including the yuan.
Opportunities For Derivative Traders
For derivative traders, the current low volatility in this range presents an opportunity. Implied volatility for one-month USD/CNH options has fallen to near 3.5%, making strategies like buying puts on the pair relatively cheap ahead of a potential breakdown below the 7.0900 support level. We would look to position for a move towards the 7.0000 mark in the coming weeks.
We have seen similar periods of consolidation before, particularly during 2023 when weak data also led to extended range-trading. However, the current combination of a dovish Fed and proactive easing from Chinese authorities makes a downward break in USD/CNH more probable this time. Traders should therefore watch the PBoC’s daily fixings closely for signs of a shift in their tolerance for yuan strength.
