Yen and Yuan Watch: USD/JPY and USD/CNY Daily — 2026-09-12

Top developments

Yen Hits Seven-Month High, Exceeding Intervention Peaks

On September 7, the yen strengthened to its highest level since February, surpassing the peak reached during the earlier coordinated intervention by Japan and the US. This surge has raised questions about whether a larger unwind of the yen carry trade could dent the rally in global stocks, with USD/JPY breaking below key technical levels. The move signals that market fundamentals are now driving the currency more than direct Ministry of Finance intervention, though the threat of further action remains a backdrop.

Yuan Emerges as New Carry Trade Funding Vehicle

As the yen strengthens, strategists note that the Chinese yuan is gaining renewed attention as a currency to fund carry trades. Investors are seeking alternatives to the increasingly expensive yen, with USD/CNH trading in a tight range near 6.70–6.71. This shift suggests that while the PBoC manages the onshore rate, offshore markets are beginning to price the yuan into global risk strategies, altering traditional USD/JPY-centric flows.

PBoC Sets Firmer Fixing to Balance Export Needs and Market Strength

The People's Bank of China (PBoC) set the USD/CNY reference rate at 6.7766, signaling a tolerance for a slightly weaker yuan compared to market estimates to aid exporters. Despite this, the daily fix was higher than some expectations, slowing the downside pace of the yuan after it had climbed toward its strongest levels against the dollar in over three years. This delicate balancing act aims to prevent excessive volatility that could disrupt trade while acknowledging the underlying strength of the Chinese currency.

Carry Trade Unwind Accelerates, Pressuring Global Equities

The rapid strengthening of the yen has caused the carry trade to unwind faster than expected, with Bank of America’s target for USD/JPY moving closer to 149. Analysts warn that this unwind could have significant knock-on effects for global equity markets, as investors repatriate funds and liquidate positions in higher-yielding assets. The speed of this adjustment is putting pressure on risk assets globally, highlighting the systemic importance of the yen's direction.

Local view

In Japan, media outlets like Nikkei and Gaitame.com are focusing heavily on the sustainability of the yen's rally and the potential for further Bank of Japan policy tightening. Reports highlight that despite the recent strength, fundamental drivers such as the US-Japan interest rate differential continue to exert downward pressure on the yen, suggesting the rally may be fragile if BoJ signals remain dovish. Meanwhile, Chinese financial media is discussing the "quietly becoming stronger" narrative for the yuan, noting that exporter conversion and policy tolerance are giving the currency room to appreciate, even as the PBoC uses the fixing to manage the pace.

Context & numbers

• USD/JPY: Broke below 155, with BofA targeting 149 amid carry trade liquidation.
• USD/CNY: The PBoC set the reference rate at 6.7766, while Reuters estimates suggested a fix around 6.7174, indicating a slight deviation to support exports.
• USD/CNH: Trading between 6.7059 and 6.7124 recently, showing tight range-bound behavior relative to the onshore fix.
• Yen Performance: The yen has become the best-performing major currency against the USD in 2026, falling below its end-2025 level of 156.70.

On the radar

• BoJ Policy Signals: Watch for any hints from the Bank of Japan regarding further rate hikes or yield curve control adjustments, which could accelerate the carry trade unwind.
• PBoC Fixing Guidance: Monitor daily PBoC fixes for signs of "counter-cyclical factor" usage if the yuan strengthens too rapidly against the dollar.
• US Treasury Comments: Statements from US Treasury Secretary Scott Bessent regarding currency manipulation or fair exchange rates could trigger renewed volatility in both USD/JPY and USD/CNY pairs.