Nomura Model Forecasts USD/CNY Fixing at 6.7853

Overview

This research note, issued by Nomura Securities’ Global Markets Research division, presents an Asia FX strategy report centered on its proprietary USD/CNY fixing pricing model to quantitatively forecast the next trading day’s CNY/USD central parity rate. The report indicates that, according to model calculations, the fixing is expected to decline significantly to 6.7853, reflecting the combined impact of market supply-demand dynamics and movements in the currency basket. Additionally, the report provides an alternative forecast incorporating the countercyclical factor and details key currency contributions and upcoming macroeconomic calendar events relevant to the forecast.

Core views

Model Forecast and Magnitude of Change: The Nomura model forecasts the USD/CNY fixing to decline by 438 pips from the previous fixing of 6.8291 to 6.7853. Notably, this forecast remains 36 pips above the prior trading day’s official spot closing rate, indicating that the fixing still partially reflects market closing levels. Countercyclical Factor Scenario Analysis: Considering the possibility that the People’s Bank of China may incorporate the countercyclical factor into the fixing mechanism to smooth excessive volatility, the report provides an adjusted forecast. With the countercyclical factor included, the fixing is projected at 6.8056, down 235 pips from the prior fixing. This value lies between the pure model forecast and the previous fixing, illustrating the potential stabilizing role of policy adjustments on exchange rate expectations. Key Currency Contribution Breakdown: Decomposing the basket currencies influencing the fixing, the model shows that the euro (EUR) contributed most positively to the forecast change (approximately +20 pips), followed by the Russian ruble (RUB, ~+9 pips) and Mexican peso (MXN, ~+7 pips). In contrast, the Korean won (KRW) showed a significant negative contribution (~−16 pips), acting as one of the primary drags on the fixing. Macro Event Calendar: The report advises investors to monitor key macro milestones in the second half of 2026, including the late-July meeting of the CPC Central Committee Political Bureau (which typically sets the tone for H2 economic policy), the APEC Leaders’ Informal Meeting in Shenzhen in November, the Central Economic Work Conference in mid-December, and the anticipated state visit by China’s President to the U.S. toward year-end. These events could profoundly influence the policy environment and market expectations for the RMB exchange rate.

Analysis framework

Nomura Securities employs a hybrid approach combining quantitative analysis with fundamental insights in its FX research. Specifically for fixing forecasts, the core methodology relies on the CFETS RMB Index basket weights, integrating overnight movements of major currencies against the USD from the prior trading day to derive a theoretical fixing level through a mathematical model. This approach objectively captures the transmission mechanism of global FX market volatility into RMB pricing. Furthermore, analysts compare the 'pure model forecast' with the 'countercyclical-adjusted forecast' to assess regulators’ tolerance for exchange rate volatility and potential intervention intentions, offering investors a more comprehensive perspective.

Methodology notes

• Quantitative/Factor/Portfolio Theory

  USD/CNY Fixing Pricing Model

  This is a specialized quantitative tool designed to forecast the daily USD/CNY central parity rate announced by the PBOC. It is typically calculated based on weighted changes in a basket of currencies (such as components of the CFETS index) from the prior trading day, helping investors understand the mechanical rules behind fixing formation and deviations from market expectations.

• Macroeconomic framework

  Countercyclical Factor Adjustment Mechanism

  This is a calibration tool introduced by China Foreign Exchange Trade System (CFETS) into the fixing quotation model to offset procyclical market sentiment swings (e.g., herding behavior). When the model forecast deviates substantially from fundamentals, the countercyclical factor moderates the fixing to better align with economic realities. The report highlights this policy dimension by comparing forecasts with and without the factor.

Key data

• USD/CNY Fixing Forecast6.7853Down 438 pips from prior fixing of 6.8291
• Forecast Including Countercyclical Factor6.8056Down 235 pips from prior fixing
• Difference vs. Previous Day’s Closing Rate+36 pipsForecast is higher than the prior trading day’s official spot closing rate
• EUR Contribution+20 pipsLargest positive contributor to fixing change
• KRW Contribution-16 pipsPrimary negative contributor to fixing change

Impact & implications

The report suggests that the forecasted downward adjustment in the fixing reflects transmission pressures from global FX market volatility—particularly the weakening of Asian currencies like the KRW—onto RMB pricing. For market participants, the gap (~200 pips) between the pure model forecast and the countercyclical-adjusted forecast offers a window into policy stance. If the actual fixing aligns closely with 6.8056, it implies authorities may be using the countercyclical tool to stabilize the rate; if closer to 6.7853, pricing is more driven by market supply-demand forces. Additionally, high-level China-U.S. interactions toward year-end could be a pivotal variable shaping longer-term exchange rate expectations.

Risks

• The model relies on historical data and simplified assumptions and may not fully capture complex future policy interventions or unexpected market shocks.
• Geopolitical risks or abrupt shifts in macro policy could cause the exchange rate to deviate significantly from model projections.
• Changes in liquidity or sharp shifts in market risk appetite may alter cross-currency correlations, potentially reducing model accuracy.

What to watch

• The late-July 2026 CPC Central Committee Political Bureau meeting and its guidance on economic policy.
• Progress at the November 2026 APEC Leaders’ Meeting in Shenzhen, China.
• Policy signals from the mid-December 2026 Central Economic Work Conference.
• Scheduling and diplomatic outcomes of the Chinese President’s state visit to the U.S. toward end-2026.