On December 1, the central parity rate of the RMB against the US dollar was 7.1104, up 674 basis points from November 1. As of 18:00 on December 1, the onshore and offshore RMB traded at 7.1384 and 7.1449 against the US dollar respectively. Since November, the RMB exchange rate has continued to strengthen, the central parity rate of the RMB against the US dollar has risen to 7.10 from 7.17 in early November, and the onshore and offshore RMB against the US dollar have risen to 7.13 and 7.14 from 7.31 and 7.33 in early November respectively. For the strengthening of the RMB exchange rate this round, market institutions generally believe that the external environment has improved due to the decline of the US dollar index in November. Data show that the dollar index has fallen from 106.66 on November 1 to 103.51 on November 30; The yield on the 10-year Treasury fell to 4.37% on Nov. 30 from 4.77% on Nov. 1. The dollar is an important factor affecting global financial markets. In 2023, the international situation is complex and severe, the interest rate of major developed economies remains high, the yield of US Treasuries once rose above 5%, and the RMB exchange rate continued to be under pressure in the first three quarters. With a number of economic data such as employment and inflation in the United States falling significantly in November, the market's expectation that the Federal Reserve will stop raising interest rates has gradually increased. Experts generally believe that the US dollar "top" or has appeared, the trend to fall or will support the RMB exchange rate.
Zou LAN, director of the monetary Policy Department of the People's Bank of China, pointed out at the press conference on financial statistics in the third quarter that the market is generally expected that the Fed is nearing the end of this round of interest rate hikes, and the US bond yield will fall after a 10-year high, and the interest rate spread between China and the US will gradually return to the normal range, which will help support the RMB exchange rate. For the strengthening of the RMB exchange rate in the month, Zhao Wei, chief economist of Sinolink Securities, pointed out that in the early stage, the appreciation of the RMB depended more on the rise of the US dollar. However, since November 17, the appreciation of the RMB has been higher than the depreciation of the US dollar index, and the RMB has shifted from "passive" appreciation to "active" appreciation. He believes that since the beginning of the year, under the concern of RMB depreciation, a large number of foreign exchange settlement demand "backlog"; The recent easing of depreciation concerns, coupled with the seasonal year-end settlement of foreign exchange, the release of foreign exchange settlement demand or the exchange rate has significant support. "Three logic dictates that the most stressful phase of this cycle for the renminbi is passing." Guangfa Securities macro analyst Zhong Linnan concluded that the domestic economic growth has passed the bottom, although the short-term demand is still weak, but there have been a series of positive clues; The continuous slowdown of US inflation and job market data indicates that the Fed's rate hike cycle has ended, the US Treasury interest rate center may continue to decline, and the pressure on the exchange rate between China and the US has eased; China-us relations are moving towards the same direction, and the external environment for development is more favorable.
The movement of exchange rates depends fundamentally on economic fundamentals. The People's Bank of China's third quarter monetary policy implementation report pointed out that there are many favorable factors for China's economy to maintain stable development. Looking ahead, the internal driving force of the economy will continue to strengthen, the potential of consumption will continue to be released, and the new driving force of investment will help stabilize aggregate volume and improve the structure. Exports will remain highly competitive. China's economy will continue to return to normal operation, and the annual growth target of around 5% is expected to be successfully achieved. The central bank report also pointed out that in the next stage, it will resolutely correct market pro-cyclical behaviors, resolutely deal with behaviors that disrupt market order, resolutely prevent exchange rate overshoot risks, prevent the formation of unilateral consistent expectations and self-strengthening, and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level. Li Chao, chief economist of Zheshang Securities, believes that the People's Bank of China has expressed its firm stance on the exchange rate issue, and will continue to do a good job of monitoring and analysis of cross-border capital flows and risk prevention, and may continue to increase the relevant policies or expected guidance measures on the exchange rate to stabilize the trend of the exchange rate. Gao Ruidong, chief economist of Everbright Securities and director of the institute, said that the domestic policy of stable growth at the end of the year is expected to further strengthen the RMB exchange rate to form further support. Looking forward to 2024, the economic and monetary policy cycle of China and the United States is expected to converge from divergence, driving the RMB into the appreciation channel, but the space is subject to the decline of the US dollar index.
