CNH and CNY Break Above 6.7 per Dollar, Hitting 2023 High

On September 18, both onshore and offshore renminbi (RMB) strengthened past the 6.7 mark against the U.S. dollar, hitting a new high since the beginning of 2023.

According to multiple interviewees who spoke with Cailianshe reporters, the appreciation of the RMB is driven by multiple factors. Among them, a strong foreign trade environment, coupled with a current account surplus and sustained resilience in foreign exchange settlement, have played key roles. Industry insiders expect the RMB exchange rate to maintain a stable-to-strong trend in the short term, with a possible "strengthening first, stabilizing later" trajectory for the full year.

Stable External Trade Environment Provides Strong Support for RMB

On September 18, the central parity rate of the RMB against the U.S. dollar was set at 6.7521, up 59 basis points from the previous trading day, marking the eighth consecutive trading day of appreciation.

On the same day, both onshore and offshore RMB broke through the 6.7 threshold against the dollar, reaching their highest levels 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 Cailianshe that since the beginning of this year, the anchor for RMB exchange rate pricing has shifted to the trade balance. Strong exports and the release of foreign exchange settlement demand have provided robust support, while the impact of factors such as interest rate differentials 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 remarks from [Fed official] Waller sending hawkish signals—leading to a significant rise in the U.S. dollar index—the RMB has performed steadily, even breaking through 6.7 on September 18," Ming said.

Wang Qing, Chief Macro Analyst at Dongfang Jincheng, analyzed that the RMB's strength today may be attributed to two direct factors: first, after the effect of the Fed's rate hike was released, the U.S. dollar index fell back from its overnight highs; second, the RMB central parity rate has been continuously adjusted in a stronger direction recently, including today.

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

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

Short-Term Outlook: RMB Expected to Remain Stable-to-Strong; Full-Year Trend May Be "Strong First, Stable Later"

Looking ahead, Wang Qing predicts that the RMB exchange rate is likely to continue its stable-to-strong trend in the short term. In the later period, 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 U.S. dollar index.

"It is expected that the RMB will generally maintain a pattern of moving inversely to the U.S. dollar, with relatively small fluctuations. We forecast that the core trading range for the RMB exchange rate by the end of the year will be between 6.7 and 6.9. The full-year RMB exchange rate trend may be 'strong first, stable later,'" Wang said.

Ming Ming from CITIC Securities also commented to Cailianshe on the outlook for the RMB.

(Source: Cailianshe)