Exchange rate breaks 7.1

On the 30th, the central parity rate of the RMB against the US dollar was 7.1124, up 175 points, appreciating to the highest level since June 7.

Since August, the RMB exchange rate has appreciated significantly against the US dollar. After trading on August 29, both offshore and onshore RMB rose to 7.10 against the US dollar, up more than 300 points during the day, of which the onshore RMB reached the highest level since December 29 last year.

As for the reasons for the continued strength of the renminbi, analysts say that it is mainly affected by multiple factors at home and abroad. On the domestic front, the RMB exchange rate is mainly influenced by the resonance of domestic fundamentals, the continued weakening of the US dollar, and the increasing attractiveness of RMB assets. On the international front, the expectation of the US Federal Reserve to cut interest rates has boosted the RMB exchange rate to a certain extent.

As the US Federal Reserve's rate cut approaches, expectations of yuan appreciation are strengthening. Guan Tao, global chief economist at Bank of China Securities, said there is a possibility of rapid and sharp appreciation of the yuan due to exporters' settlement of foreign exchange and unwinding of carry trades, due to fluctuations in international markets. Stephen Jen, CEO of British hedge fund Eurizon SLJ Capital, believes that when the Federal Reserve cuts interest rates, the attractiveness of dollar assets will be eroded and may stimulate a $1 trillion (7.1 trillion yuan) "conservative" repatriation of funds, as the interest rate gap between China and the United States is narrowing.

Some experts said that China's stable economic growth, trade surplus to maintain a high, good balance of payments, these positive fundamental factors also provide strong support for the RMB exchange rate.

Data released by the Society for Worldwide Interbank Financial Telecommunication (Swift) showed that in July this year, the RMB remained the fourth most active currency in the world, accounting for 4.74% of the global payment currency rankings based on the amount of money. Compared to June 2024, the total amount of RMB payments increased by 13.37%, while the total amount of all currency payments increased by 10.29%. Meanwhile, the renminbi's share of cross-border trade finance business reached 6 per cent in July, surpassing the euro's 5.83 per cent and second only to the US dollar.

Wang Qing, chief macro analyst of Oriental Jincheng, said that with the effect of stable growth policies and the sustained and rapid development of new quality productivity, it is expected that domestic GDP growth will remain at about 5% in the second half of the year, which will form an internal support for the RMB exchange rate.

Cicc research report believes that in the short term can not rule out the continued release of foreign exchange settlement demand, the possibility of rapid appreciation of the exchange rate; In the medium and long term, changes in the overseas environment will still be the main influencing factor for the RMB exchange rate. On the one hand, this depends on the Fed's policy and the change in the interest rate differential between China and the United States, and on the other hand, it is related to the risk appetite of overseas markets.