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on september 23, the central parity rate of rmb against the us dollar was 7.0531, up 113 basis points from the previous trading day, setting a new high since may 25, 2023. since the beginning of this year, the central parity rate of rmb against the us dollar has appreciated by 0.42%, and has appreciated by 1.34% from the low point of 7.1479 on august 13. both the onshore and offshore rmb exchange rates have also recovered the 7.05 mark. as of 10:43 am, they were reported at 7.0482 and 7.0487 respectively. the offshore rmb exchange rate rose above the 7.04 mark during the session, reaching a high of 7.0396.

the weakening of the us dollar index is an important reason for the current round of rmb appreciation. since august, the rmb spot exchange rate against the us dollar has appreciated by nearly 2.4%, and the rmb central parity rate against the us dollar has appreciated by nearly 1%. during the same period, the us dollar index fell by 3.6%. in the early hours of last thursday, after the federal reserve released the news of an unexpected interest rate cut, the us dollar index fell 0.3% to 100.592 on the same day, and non-us currencies including the rmb generally rose. the onshore rmb against the us dollar rose by 391 basis points to 7.0552 last week, and the offshore rmb against the us dollar rose by 592 basis points to 7.0417. the rmb central parity rate against the us dollar has been adjusted up by 386 basis points.

can this wave of appreciation bring the rmb exchange rate back to the “6 era”?

wang wen, dean of the chongyang institute for financial studies at renmin university of china, believes that as the federal reserve continues to cut interest rates before the end of the year, it is entirely possible that the rmb exchange rate will return to the "6 era" this year. wang wen said that the rmb exchange rate will definitely be optimistic in the long term. anyone who has traveled and lived in europe and the united states knows that the purchasing power of the rmb is seriously underestimated. one of the important reasons is that western public opinion has had serious prejudices and misunderstandings about the early stage of the chinese economy for many years. in recent years, western public opinion has been singing the "china peaking theory", which resonates with china's low expectations, once again suppressing the rise of the rmb exchange rate. in recent weeks, expectations of us interest rate cuts have continued to rise, prompting an increase in international demand for the rmb, which naturally led to an unstoppable rise in the rmb exchange rate, repeatedly hitting new highs in recent years. wang wen feels that it is far from the high point of the rmb exchange rate. after all, it was still around 6.3 in june 2022. he said that optimistically, as the federal reserve continues to cut interest rates before the end of the year, it is entirely possible that the rmb exchange rate will return to the "6 era" this year.

some institutions hold a more cautious view.citic securitiesit is expected that the centralized settlement of foreign exchange by export enterprises in the future may increase short-term exchange rate fluctuations, and the rmb exchange rate may approach 7.0. however, the probability of the rmb exchange rate breaking through 7.0 this year is not high.

citic securities research report gave three reasons for this. first, although the fed's interest rate cut was large this time, the subsequent path it gave was flexible and stable. after the interest rate meeting, the market's expectations for a "soft landing" of the us economy are increasing. if subsequent economic data stabilizes, the downward space for the us dollar index and us bond interest rates may be limited. second, in the short term, the domestic economy still has the problem of insufficient effective demand. my country's economic data in august showed that the growth rate of the production side was stable with a slight decline, and the growth rate of the demand side continued to be sluggish. the impact of insufficient demand may gradually be transmitted to the production side. third, the people's bank of china hopes to maintain exchange rate stability. too fast appreciation and too fast depreciation may both have certain risks. since august, with the appreciation of the rmb, the central parity, onshore price and offshore price have basically achieved "three prices in one", and the counter-cyclical factor has faded. citic securities believes that this may mean that the exchange rate has returned to the range agreed by the central bank. if the rmb exchange rate appreciates too quickly, it may be unfavorable to the export sector. especially after more than two years of depreciation cycle, some export companies have reduced foreign exchange hedging out of speculative psychology, and the current risk exposure to the appreciation of the rmb is relatively high.

wang qing, chief macro analyst at orient securities, believes that the current rmb exchange rate is mainly affected by two factors: on the one hand, the trend of the us dollar, which will cause the rmb to passively appreciate or depreciate against the us dollar; on the other hand, the domestic macroeconomic trend determines the rmb's intrinsic appreciation or depreciation momentum.

wang qing said that judging from the trend of us stocks, us bonds and the us dollar after the announcement of the rate cut, the extent of this rate cut is in line with market expectations. after the fed cuts interest rates, the impact on the rmb exchange rate is mainly reflected through the trend of the us dollar, which in turn depends mainly on the pace of the next rate cut. if the fed cuts interest rates at a faster pace, exceeding 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 the possibility of returning to the 6-digit range in the short term cannot be ruled out. on the contrary, if the rate cut is slow, the fluctuation of the us dollar index is limited, and the rmb exchange rate against the us dollar will remain basically stable.

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text/beijing youth daily reporter cheng jie

editor/fan hongwei