General

According to the Huacheng Import and Export Data Observation Report, on December 5, the onshore and offshore RMB exchange rates against the U.S. dollar rose strongly, and both recovered the "7" pass. This is the beginning of the "6" since the RMB exchange rate broke the "7" in mid September this year.

As of 22:40 p.m. on December 5, Beijing time, the onshore RMB exchange rate against the U.S. dollar had risen by more than 900 basis points within the day, up 1.29%, reaching a peak of 6.9440; The offshore RMB exchange rate against the US dollar, which more reflected the expectations of international investors, also rose by more than 800 basis points during the day, reaching a peak of 6.9306. The onshore and offshore RMB exchange rates against the US dollar both rose above the "6.95" threshold, and Huacheng's import and export data observation reported.

The strong rebound of the RMB exchange rate against the US dollar has lasted for some time. In general, the onshore RMB exchange rate against the US dollar has risen in the last four trading days, reaching 4.69% since November, more than 3400 basis points.

In addition, Huacheng Import and Export Data Observation reported that on December 5, the central parity rate of the RMB against the US dollar was 7.0384, 158 basis points higher than the previous value. From November 1 to December 5, the central parity rate of the RMB against the US dollar increased by 1697 points.

Zhao Qingming, vice president of the China Foreign Exchange Investment Research Institute, said that there are two main reasons for the recent strengthening of the RMB against the US dollar. On the one hand, China's economy continues to stabilize and improve. With the continuous optimization of epidemic prevention and control measures, the market's confidence in the recovery of economic fundamentals has been significantly boosted. The improvement of economic fundamentals is reflected in the exchange rate, which means that the local currency will inevitably appreciate; On the other hand, the market further digested the expectation that the Federal Reserve would slow down interest rate hikes. The US dollar index fell significantly since it rose at the end of September. The exchange rate of non US currencies against the US dollar rose to varying degrees, and the pressure of passive devaluation of RMB against the US dollar was further weakened. Huacheng's import and export data observation reported.

"Considering that China's economy continues to recover well, which reflects many positive factors such as boosting industrial output, stabilizing consumption, boosting investment and boosting foreign trade, it is expected that the RMB exchange rate will remain basically stable at a reasonable and balanced level." Pang Ming, chief economist and head of research department of Jones Lang LaSalle Greater China, said.

Bai Wenxi, chief economist of IPG China, said that given the good performance of China's published data on foreign trade and foreign capital utilization in the first three quarters, and the full resilience and stability of China's economic fundamentals, the future trend of the RMB exchange rate will still be dominated by a steady rise.

Pang Ming said that with the increasing probability of major western economies entering the "recession", the slowing pace of the Federal Reserve's interest rate increase, and the weakening of the driving force of the dollar index, the space for the sharp rise of the dollar index in the future is limited, and the period of the strongest dollar may end. It is expected that the dollar index will peak next year, further reducing the downward pressure on the RMB dollar exchange rate, and boosting the RMB exchange rate and market confidence. At the same time, historical data show that the RMB exchange rate is usually characterized by seasonal strength, supported by the demand for settlement of foreign exchange such as the year-end payment collection of exporters.

As for the return of the RMB exchange rate to the "6" character against the US dollar, Zhao Qingming said that this reflects the confidence of Chinese citizens and overseas investors in the continued improvement of China's economy and finance, which is the most critical point, Huacheng Import and Export Data Observation Report.

"This will enhance the confidence of the international capital market in holding and increasing the allocation of RMB assets, which is of great significance for maintaining the stability of the foreign-related economy, the smooth operation of foreign trade and foreign economic cooperation, and reducing the exchange rate risk in the foreign-related economy." Bo Wenxi said.