JPMorgan takes profit on Chinese yuan rally
JPMorgan Chase & Co. said it has closed its long position on the offshore Chinese yuan after Beijing moved to cool the currency’s sharp rally.
The decision followed a policy adjustment by the People's Bank of China (PBOC), which cut the risk reserve requirement on foreign exchange forward purchases to zero from 20%, effective March 2. The move lowers the cost for banks and financial institutions to buy dollars via forwards, News.Az reports, citing Reuters.
The offshore yuan (CNH), up 7.5% against the dollar since the start of 2025, weakened by more than 100 pips after the announcement, slipping beyond 6.85 per dollar.
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“Having run CNH longs since November, we tactically neutralise the position while taking profit,” JPMorgan analysts wrote in a research note. The bank also exited its CNH/SGD (offshore yuan versus Singapore dollar) long trade.
Analysts said the earlier-than-expected rule change signaled that the yuan’s rise may have exceeded what policymakers were comfortable with.
Under the new rule, financial institutions no longer need to set aside reserves when purchasing foreign currency through forwards. JPMorgan said this should encourage more dollar buying from onshore investors, activity that had declined significantly since 2022.
The shift has also raised questions about whether the yuan’s recent bullish momentum is losing steam in the short term.
China’s currency trades in two markets:
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CNY: The onshore yuan, traded within mainland China under tighter controls
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CNH: The offshore yuan, freely traded in global financial hubs such as Hong Kong
While JPMorgan has turned tactically neutral in the near term, it maintains a medium-term bullish outlook on CNY, expecting foreign investors to continue buying Chinese equities and companies to keep selling dollars.
“If this pans out, it could risk downside to our medium-term USD/CNY targets,” analysts said, adding they would consider rebuilding long yuan positions if market levels become more attractive.
By Aysel Mammadzada
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