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the recent appreciation of the rmb exchange rate has been significant. beijing business daily reporters noted that at around 8:00 am on september 25, beijing time, the offshore rmb exchange rate rose above the 7.0 mark, reaching a high of 6.9951, returning to the 6 range. as of 18:22 on the same day, the onshore rmb exchange rate against the us dollar and the offshore rmb exchange rate against the us dollar both fluctuated slightly around 7.02.

it is worth mentioning that the offshore rmb exchange rate has broken through the 7.0 mark for the first time since may last year, and has reached a 16-month high. in the view of industry insiders, after the fed cut interest rates, coupled with the recent introduction of a package of domestic policies and the positive expectations for domestic economic recovery, this round of offshore rmb appreciation has steadily broken through the 7 mark. looking ahead, the current foreign exchange market is bullish, and the previously pent-up demand for foreign exchange settlement will be further released. after the rmb exchange rate "breaks 7", there may be room for appreciation.

strong upward trend "breaking 7 and entering 6"

on september 25, the people's bank of china authorized the china foreign exchange trading center to announce that the central parity rate of the rmb in the interbank foreign exchange market was 7.0202 yuan per u.s. dollar, an increase of 308 points in a single day. the previous day's report was 7.051. the central parity rate of the rmb against the u.s. dollar has been appreciating for several consecutive trading days.

on the same day, the onshore and offshore rmb/usd exchange rates fell back, both fluctuating slightly around 7.02. as of 18:30 on september 25, the onshore rmb/usd exchange rate was 7.0227, with a daily appreciation of 0.13%; the offshore rmb/usd exchange rate was 7.0214, with a daily depreciation of 0.15%.

in fact, in recent months, the rmb exchange rate has shown a strong appreciation trend. looking at the timeline, on september 25, the onshore rmb exchange rate against the us dollar appreciated to 7.0160, up 2794 basis points from the highest in july; the offshore rmb exchange rate against the us dollar reached a high of 6.9951, up more than 3000 basis points from the highest in july.

beijing business daily reporters further compared and found that in this round of rmb appreciation, the offshore rmb rose more than the onshore rmb, with the highest value of 6.9951, which has set a new high since may 2023.

zhou maohua, a macro researcher at the financial markets department of china everbright bank, told the beijing business daily that at present, the first wave of sharp depreciation of the us dollar, expectations for my country's economic recovery and the attractiveness of rmb assets have led to a sharp and rapid rebound in the rmb recently, and the extent of appreciation has exceeded expectations.

catalyzed by multiple factors at home and abroad

on september 24, the day before the rmb broke 7, pan gongsheng, governor of the people's bank of china, said at a press conference that the monetary policies of major economies have been adjusted recently, and the pressure on the depreciation of the rmb exchange rate has been significantly alleviated, and it has turned to appreciation. on september 18, the federal reserve cut interest rates by 50 basis points, which was the first interest rate cut in the past few years when the federal reserve has been in a cycle of interest rate hikes.

at the same time, some other central banks in the world, such as the european central bank, have cut interest rates twice since june, a total of 50 basis points, the bank of england cut interest rates by 25 basis points in august, and central banks such as canada and sweden have also turned to cutting interest rates. except for the bank of japan, the monetary policies of major economies have entered a cycle of interest rate cuts, and the momentum of the appreciation of the us dollar has weakened. with the convergence of the difference in monetary policy cycles at home and abroad, the external pressure on the basic stability of the rmb exchange rate has been significantly reduced. on september 23, the rmb exchange rate against the us dollar was about 7.05 yuan, an appreciation of 2.4% since august.

the exchange rate is a price ratio between currencies, and is affected by a variety of factors, such as economic growth, monetary policy, financial markets, geopolitics, and unexpected risk events. pan gongsheng said that from an external perspective, the uncertainty of the external environment and the trend of the us dollar still exists due to the divergence of economic trends among countries, geopolitical changes such as the us election, and fluctuations in international financial markets. however, from the perspective of china's domestic situation, the rmb exchange rate still has a relatively stable and solid foundation.

talking about the appreciation of the rmb, wang qing, chief macro analyst at orient securities, told beijing business daily that the recent sharp rise in the rmb exchange rate against the us dollar was mainly driven by multiple factors. on the one hand, on september 24, the people's bank of china announced an interest rate and reserve requirement cut and increased policy support for the real estate industry, which effectively boosted market confidence and was the main reason for the sharp rise in the rmb exchange rate.

in addition, the federal reserve cut interest rates sharply in september, and the us dollar index tended to decline, which will also promote the passive appreciation of the rmb against the us dollar. wang qing believes that the continuous appreciation of the rmb against the us dollar since july has changed market expectations. in august, the scale and rate of foreign exchange settlement by banks on behalf of customers increased, while the scale and rate of foreign exchange sales by banks on behalf of customers decreased significantly. this has formed a cycle of "improvement in foreign exchange settlement and sales balance-rmb appreciation" in the short term, and it is expected that this situation will continue to intensify in september.

ming ming, chief economist of citic securities, also said that the federal reserve announced a 50 basis point interest rate cut at its meeting in september 2024. as the federal reserve kicked off the interest rate cut, the weakening of the us dollar index eased the external pressure on the rmb exchange rate. on september 24, pan gongsheng announced a series of monetary policy combinations, including interest rate cuts, reserve requirement ratio cuts, interest rate cuts for existing mortgage loans, lower down payment ratios, and the creation of equity market innovation support tools. with the unexpected efforts on the monetary policy side, market risk appetite has shown signs of recovery, becoming a key catalyst for the rapid appreciation of the rmb exchange rate.

avoid potential decline and volatility risks

"we adhere to the decisive role of the market in exchange rate formation and maintain exchange rate flexibility. we must strengthen expectation guidance, prevent the foreign exchange market from forming unilateral consistent expectations and self-fulfilling expectations, guard against the risk of exchange rate overshooting, and maintain the basic stability of the rmb exchange rate at a reasonable equilibrium level." this is how pan gongsheng set the tone when talking about the people's bank of china's position on exchange rate policy.

looking ahead, the industry believes that the current foreign exchange market is bullish, and the previously pent-up demand for foreign exchange settlement will be further released. after the rmb exchange rate "breaks 7", there may still be room for appreciation.

as wang qing said, 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 exchange rate against the us dollar to passively appreciate or depreciate; on the other hand, the domestic macroeconomic trend determines the rmb's intrinsic appreciation or depreciation momentum.

"we believe that the rmb is expected to continue its strong performance since july in the short term. however, before the domestic real estate market stabilizes and recovers, it is unlikely that the rmb will continue to appreciate significantly." wang qing predicted that overall, the rmb will maintain a pattern of inverse fluctuations with the us dollar in the next step, and it is unlikely to deviate from the trend of the us dollar and rise or fall sharply. 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, which is of great significance to the current prevention and control of external risks. in other words, whether the rmb against the us dollar can continue to return to the "6-digit" in the future will be mainly determined by the trend of the us dollar index.

mingming said that in the future, the appreciation of the rmb in the short term may trigger the release of some foreign exchange settlement demand, and the possibility of further release of this demand causing the rmb exchange rate to rise and aggravate the fluctuation of the rmb exchange rate cannot be ruled out. in the medium and long term, it is expected that the trend of the rmb to "break 7" still needs further catalysis. first, it is necessary to observe whether fiscal policy can take over after the monetary policy is implemented, and whether the actual degree of repair of domestic fundamentals can provide further support for the exchange rate; second, it is necessary to observe the disturbance of external factors such as the us election and the federal reserve's monetary policy expectations on the rmb exchange rate.

zhou maohua said that from the perspective of internal and external environment, the environment facing the rmb is still favorable, and the rmb is expected to remain in a balanced range. in his opinion, there is a possibility of "breaking 7" in the short term, but overall, the economies and policies of major economies continue to diverge, and there are still great uncertainties in economic inflation and economy in europe and the united states, the us election, and geopolitical conflicts. financial markets are volatile, etc. it is expected that the global foreign exchange market will fluctuate violently in the future. at present, the second wave of capital inflows into rmb assets may have a positive impact on the rmb exchange rate. market players need to return to exchange rate neutrality to avoid potential risks of falling fluctuations.

beijing business daily reporter liu sihong