RMB breaks through the 6.7 mark: Both onshore and offshore exchange rates hit new highs for the peri

On September 18, the RMB strengthened significantly against the US dollar; both onshore and offshore spot exchange rates broke through the 6.70 mark, drawing heightened market attention. Data shows that the onshore RMB reached an intraday high of 6.6957, while the offshore RMB peaked at 6.6920—both hitting new highs not seen in recent years.

Meanwhile, the central parity rate of the RMB against the US dollar continued to adjust toward a stronger level. Data released by the China Foreign Exchange Trade System (CFETS) shows the central parity rate set at 6.7521 on September 18, an increase of 59 basis points from the previous trading day and the highest level since February 3, 2023. Looking at this week's performance, the central parity rate has risen for multiple consecutive trading days, accumulating a total gain of 222 basis points.

**Synchronized Strengthening of Onshore and Offshore RMB**

In terms of market performance, the RMB's breach of the 6.70 mark was not an isolated event; both onshore and offshore exchange rates demonstrated strong performance.

On September 18, the onshore RMB gradually strengthened after opening, eventually breaking through the key psychological level of 6.70. The offshore RMB was the first to cross the 6.70 threshold, reaching an intraday high of 6.6953. Relevant data indicates that the RMB spot exchange rate against the US dollar has appreciated by more than 4% year-to-date.

For ordinary market participants, 6.70 is a round-number threshold that commands significant attention. The RMB's continued strengthening—moving past levels like 6.80 and 6.70—means that fewer RMB are required to exchange for the same amount of US dollars. However, foreign exchange markets are characterized by two-way fluctuations; breaching a round-number mark on a single day does not guarantee that the subsequent trend will continue in the same direction.

**Multiple Factors Influencing the RMB Exchange Rate**

Market analysts have interpreted the reasons behind the recent strengthening of the RMB exchange rate from various perspectives. Citing Wang Qing, Chief Macro Analyst at Golden Credit Rating International (Dongfang Jincheng), China News Service’s *China-Singapore Jingwei* reported that shifts in Federal Reserve monetary policy and periodic fluctuations in the US Dollar Index are influencing the RMB exchange rate. Conversely, the recent continuous adjustment of the RMB central parity rate toward a stronger position has bolstered the currency's stability. Meanwhile, my country's generally stable external trade environment and robust export performance have provided further support for the RMB exchange rate.

A report by *Cailian Press* indicates that various market observers believe factors such as the current prosperity of foreign trade, the current account surplus, and corporate demand for foreign exchange settlement are providing strong support for the RMB exchange rate. Ming Ming, Chief Economist at CITIC Securities, noted that the factors determining the RMB exchange rate have shifted somewhat this year, with export performance and the demand for foreign exchange settlement exerting a more pronounced influence on the rate.

Regarding the external environment, recent changes in the monetary policies of major global economies have heightened volatility in international currency markets. Periodic fluctuations in the US Dollar Index affect the RMB exchange rate through the relative strength or weakness of the US dollar against other major currencies.

**How does RMB appreciation affect businesses and households?**

The strengthening of the RMB against the US dollar impacts various market participants in different ways.

For importing companies, an appreciation of the RMB against the US dollar—assuming other conditions remain constant—can reduce the amount of RMB required to pay for US dollar-denominated imports, such as goods, raw materials, and equipment. For companies with US dollar-denominated liabilities, RMB appreciation can also lower the RMB-equivalent value of those debts.

For exporting companies, however, RMB appreciation may have different consequences. If a company receives payment in US dollars or other foreign currencies, the amount of RMB obtained upon settlement may decrease. Consequently, exporters often need to place greater emphasis on managing exchange rate risk, utilizing tools such as forwards and swaps to hedge against such risks.

For households, fluctuations in the RMB exchange rate can affect the costs associated with outbound travel, studying abroad, and overseas consumption. If the RMB appreciates against the US dollar, the cost of converting RMB into US dollars decreases, assuming other factors remain unchanged.

However, the actual impact of exchange rate fluctuations on economic entities must be assessed by considering a range of factors—including commodity prices, corporate costs, the balance of payments, and specific settlement methods—rather than simply assuming that RMB appreciation is beneficial for everyone. What signal do the successive upward adjustments of the central parity rate send?

It is worth noting that on September 18, the central parity rate of the RMB was set at 6.7521, an increase of 59 basis points from the previous trading day. Over the course of the week, the central parity rate rose by a cumulative 222 basis points, demonstrating a trend of continuous adjustment toward a stronger position.

Previously, Pan Gongsheng, Governor of the People's Bank of China, stated at a meeting that China implements a managed floating exchange rate regime. He emphasized the market's decisive role in exchange rate formation while noting the need to guard against market "herd effects" and the self-reinforcement of irrational expectations. Pan also stated that China has neither the need nor the intention to gain a trade advantage through currency depreciation.

This implies that the RMB exchange rate continues to operate under the combined influence of multiple factors, including market supply and demand. The recent notable strengthening of the RMB is driven by market forces as well as changes in the central parity rate, the trajectory of the US dollar, and the domestic and international economic environments.

Future RMB exchange rate trends depend on multiple variables

Regarding the future performance of the RMB exchange rate, market observers generally emphasize that the trend is influenced by a multitude of factors, including domestic and international economic conditions, monetary policies, trade dynamics, and shifts in global financial markets.

Cailian Press cited industry views suggesting that while the RMB exchange rate may maintain a stable-to-strong stance in the short term, significant uncertainty remains regarding its long-term trajectory, and two-way fluctuation will likely remain the norm.

Therefore, although the RMB breaking through the 6.7 mark was a major headline in the foreign exchange market on September 18, it does not signal a shift into a phase of one-way appreciation. Enterprises and investors should instead focus on future developments regarding the US Dollar Index, domestic economic fundamentals, the balance of payments, trade performance, and the monetary policies of major economies.

Overall, the fact that both onshore and offshore RMB exchange rates against the US dollar broke through the 6.7 mark on September 18 reflects the currency's recent resilience. As the domestic and international economic landscapes continue to evolve, the RMB exchange rate will remain subject to market supply and demand as well as various macroeconomic factors; its future trajectory warrants continued close attention.