Yuan Breaks Below 6.7 per Dollar, Hitting 2023 High

On September 18, both onshore and offshore RMB strengthened past the 6.7 mark against the US dollar, reaching a new high since 2023.

Multiple analysts interviewed by Caixin reporters attributed the RMB's appreciation to several factors, including a robust foreign trade environment, a current account surplus, and sustained resilience in foreign exchange settlement. Industry insiders expect the RMB to maintain a stable-to-strong trend in the near term, with the full-year trajectory likely showing "strength first, stability later."

Stable External Trade Environment Provides Strong Support for RMB

On September 18, the People's Bank of China set the RMB central parity rate at 6.7521 against the USD, up 59 basis points from the previous session, marking the eighth consecutive trading day of upward adjustment.

On the same day, both onshore and offshore RMB broke through the 6.7 threshold, the highest level since January 2023. As of press time, the onshore RMB stood at 6.6972, while the offshore RMB was at 6.6947.

Ming Ming, Chief Economist at CITIC Securities, told Caixin that since the beginning of this year, the RMB exchange rate has been anchored more by trade factors. Strong exports and the release of foreign exchange settlement demand have provided substantial support, while the impact of interest rate differentials and other factors has been relatively weakened.

"Although the Federal Reserve raised interest rates by 25 basis points in September as expected and upgraded its growth and inflation forecasts for this year, with both the dot plot and Fed Governor Waller's comments sending hawkish signals—leading to a significant rise in the US dollar index—the RMB has remained stable, even breaking through 6.7 on September 18," Ming said.

Wang Qing, Chief Macro Analyst at东方金诚 (Golden Credit Rating), explained to Caixin that the RMB's strength today may be driven by two direct factors: first, the US dollar index fell back after an initial surge following the Fed's rate hike; second, the RMB central parity rate has been continuously adjusted in a stronger direction recently, including today.

"During this period, global foreign exchange markets have experienced increased volatility due to monetary policy adjustments in major overseas economies, joint intervention in the foreign exchange market by Japan and the US, and fluctuations in the Middle East situation. The RMB has generally maintained a stable-to-strong trend. This is mainly because China's external trade environment remains stable overall, exports continue to grow at a high rate, and the domestic macroeconomy is progressing steadily, providing strong intrinsic support for the RMB," Wang said.

Wang further noted that China has established a two-in-one regulatory framework for cross-border capital flows, combining "macro-prudential + micro-supervision." The risk of large-scale cross-border capital flows caused by the mismatch in monetary policy cycles between China and the US can be effectively controlled. Therefore, the impact of the Fed's rate hikes on the RMB exchange rate should not be overestimated.

Industry: RMB Expected to Maintain Stable-to-Strong Trend in Near Term; Full Year May See "Strength First, Stability Later"

Looking ahead, Wang Qing predicts that the RMB will likely continue its stable-to-strong trend in the short term. Going forward, attention should be paid to changes in China's export growth rate and the impact of monetary policy adjustments in major overseas economies on the US dollar index.

"We expect the RMB to generally maintain a pattern of moving inversely to the US dollar, with relatively small fluctuations. We forecast the core trading range for the RMB exchange rate to be between 6.7 and 6.9 by the end of the year. The full-year RMB exchange rate trend may show 'strength first, stability later,'" Wang said.

Ming Ming told Caixin: "For the RMB, comprehensively..."

(Source: Caixin)