Week in review
- U.S. July inflation slowed to 3.4% y/y
- China July inflation fell to 0.5% y/y
- Reserve Bank of Australia kept policy rate unchanged at 4.35%
Week ahead
- U.S. FOMC minutes
- China July economic activity
- Japan Q2 GDP
Thought of the week
Despite China’s large trade and current account surplus, the Chinese Yuan (CNY) appears considerably cheap in real terms, as measured by the real effective exchange rate (REER). This echoes our previous analysis of the Japanese yen’s disconnect from its current account surplus (please reach out for details). However, a comparison in nominal terms reveals slightly different dynamics. CNY NEER has actually appreciated back to early-2022 levels, with the gap between the CNY NEER and REER has widened by around 20% over the past five years. This ‘real’ depreciation largely reflects China’s muted inflation relative to its trading partners. While much of the world experienced repeated inflation shocks, China’s combination of productivity gains and modest domestic demand has helped keep price pressures subdued, widening the inflation gap between China and the rest of the world. And as such, a nominal currency appreciation without stronger domestic demand could keep imported prices lower, entrenching a weaker CNY REER trend. Ultimately, continued productivity improvement and stronger demand remain central to aligning currency strength to economic strength.
CNY performance versus trade-weighted currencies
Rebased to 100 = Jan 2016

Source: FactSet, IMF, J.P. Morgan Asset Management. Past performance is no guarantee of future results. Data reflect most recently available as of 14/08/2026.
Market data

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All returns in local currency unless stated otherwise.
Currencies’ return are based on foreign currencies per U.S. dollar. An appreciation of the foreign currency against the U.S. dollar would be positive and a depreciation of the foreign currency against the U.S. dollar would be negative.
