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the impact of the fed's 50bp rate cut in the early morning is still ongoing. although the offshore rmb against the us dollar depreciated back to 7.1 at the opening of today's trading, the offshore rmb and onshore rmb against the us dollar strengthened at noon, and the fluctuation range of the rmb exchange rate increased significantly. industry experts pointed out that if the fed cuts interest rates at a faster pace and exceeds market expectations, the us dollar index may fall below 100, and the rmb exchange rate against the us dollar will move closer to 7.0, and it is not ruled out that it may return to the 6-digit level in the short term.

however, some experts believe that the rmb exchange rate has not shown obvious regularity in the fed's previous interest rate cuts. the medium- and long-term trend of the rmb exchange rate still depends on changes in fundamentals. against the backdrop of insufficient domestic demand, the probability of the rmb exchange rate breaking 7.0 in the short term is not high.

the fed's interest rate cut is positive for the rmb exchange rate

in the early morning of september 19, the federal reserve announced that the target range of the federal funds rate would be reduced by 50 basis points from 5.25%-5.50% to 4.75%-5.00%. this is the first rate cut since the fed launched this round of tightening cycle in march 2022.

"the fed has limited room to cut interest rates in the short term, and the current 50bp rate cut is unlikely to become the norm. the fed's reasonable cumulative rate cut this year is around 100bp, that is, a 25bp cut at each of the two subsequent meetings in november and december, to prevent financial conditions from unnecessarily easing too quickly and the risk of an inflation rebound," said bai xue, senior vice president of research and development at orient securities.

luo zhiheng, chief economist of guangdong securities, believes that the fed's interest rate cut is beneficial to the domestic stock market, bond market and rmb exchange rate. the easing of global liquidity will help provide incremental funds for the chinese stock market. the increase in my country's monetary policy space will drive bond yields down, and the pressure on the us dollar will help stabilize the rmb exchange rate.

"after the fed cuts interest rates, the us dollar is likely to depreciate, while the rmb will appreciate relatively. due to the increase in the purchasing power of the rmb and other factors, the cost for domestic residents to study abroad, travel, consume and invest will be reduced," dong ximiao, chief researcher of china unionpay, told a reporter from cailianshe.

will the rmb exchange rate break 7?

the rmb has appreciated in recent times, and the market is quite optimistic about the rmb breaking through the "7" mark. however, as the fed cut interest rates, the offshore rmb against the us dollar depreciated back to above 7.1 at the opening today. foreign exchange expert zhang tianlai believes that the market expects the fed to cut interest rates by 50% in the next two meetings this year, which is slightly smaller than the market's previous expectation of a full-year interest rate cut, so the us dollar has been boosted.

"today's onshore opening also broke through 7.1, but due to the export companies' fear of continued interest rate cuts in the future, they have a clear willingness to convert foreign exchange into rmb at high prices, and the fluctuation range of the rmb exchange rate has increased significantly, from 7.11 at the opening in the morning to the current 7.07 or so," said zhang tianlai. for import and export companies, the current exchange rate risk is prominent, and the awareness and concept of companies to combat exchange rate risks needs to be strengthened urgently.

at press time this afternoon, the onshore rmb/usd exchange rate once closed at 7.0697; the offshore rmb/usd exchange rate once closed at 7.06907;

wang qing, chief macro analyst at orient securities, believes that if the fed cuts interest rates at a faster pace and exceeds market expectations, the u.s. dollar index is likely to fall below 100, and the rmb exchange rate against the u.s. dollar will move closer to 7.0, and it is not ruled out that it may return to the 6-digit range in the short term.

wang qing said that whether the rmb can return to 6 against the us dollar in the future will be mainly determined by the trend of the us dollar index. "in the next step, the rmb will maintain a pattern of inverse fluctuations with the us dollar, and it is unlikely to rise or fall sharply away from the trend of the us dollar. this also means that in the future, "maintaining the basic stability of the rmb exchange rate at a reasonable equilibrium level" does not mean sticking to a certain exchange rate point, but focusing on preventing the rmb from rising or falling sharply away from the trend of the us dollar. this is of great significance for the current prevention and control of external risks."

the rmb exchange rate depends more on changes in fundamentals

some experts believe that the rmb exchange rate against the us dollar is unlikely to break through 7 in the short term. wu chaoming, deputy director of the caixin research institute, told cailianshe reporters that the impact of the fed's interest rate cut on the rmb exchange rate is relatively comprehensive. against the backdrop of insufficient domestic demand, the probability of the rmb exchange rate breaking through 7.0 in the short term is not high.

"the fed's interest rate cut will help ease the pressure on the depreciation of the rmb exchange rate and enhance stability in the short term; the interest rate gap between china and the united states is expected to stabilize or even narrow further, alleviating the pressure of foreign exchange outflow. according to the fed's dot plot, there will be two more interest rate cuts this year, totaling 50bp. even if the domestic central bank cuts interest rates, it will help stabilize the interest rate gap between the two countries. in addition, the fed's interest rate cut has a strong spillover effect on the world. on the one hand, it will ease the tight financing environment in the global financial market. on the other hand, while stabilizing the us domestic economy, it will also benefit global economic growth and indirectly help stabilize the rmb exchange rate," said wu chaoming.

wen bin, chief economist of minsheng bank, believes that the recent expectations of the fed's interest rate cut have increased, the interest rate gap between china and the united states has narrowed, and the reverse liquidation of yen carry trades has increased the willingness of enterprises to settle foreign exchange, which has led to a substantial appreciation of the rmb. after the fed's interest rate cut is implemented, the pressure on the rmb to depreciate will be further reduced. it is expected that the usd/rmb exchange rate will fluctuate in the range of 7-7.2 for most of the time this year.

many industry experts believe that the medium- and long-term trend of the rmb exchange rate still depends on changes in fundamentals. "this round of interest rate cuts is likely to be a precautionary cut, similar to the interest rate cut cycle in 1995," wen bin pointed out, pointing out that the rmb exchange rate has not shown obvious regularity in the fed's previous interest rate cut cycles.

wu chaoming also believes that the impact of the fed's interest rate cut on the rmb exchange rate is complex. in the short term, it is conducive to the stability of the rmb exchange rate. in the medium and long term, the rmb exchange rate is the result of the combined effect of multiple factors. it fundamentally depends on the relative strength changes in the economic fundamentals of china and the united states and the expected evolution behind them. it is a reflection of the comprehensive strength of the two countries.

"the federal reserve's interest rate cuts have increased pressure on the dollar to depreciate; however, the exchange rate is also affected by many factors, including the relative strength of domestic and foreign economic fundamentals, the international trade situation, liquidity, and risk aversion. therefore, within three months after the first interest rate cut, the dollar's overall trend has risen and fallen. the exchange rate trends of the yen, renminbi, and euro are also relatively independent," luo zhiheng also said.