Report Information - Report Title: "破七之后：强势已现，空间几何" - Report Date: December 26, 2025 - Research Institute: Huatai Futures Research Institute - Analysts: Cai Shaoli, Zhu Simou [1] Report's Industry Investment Rating - Not provided in the report Core Viewpoints - The logic of RMB's oscillatory strength remains unchanged. The RMB has broken through the 7.00 integer mark, but the appreciation this round is more driven by external factors and trade rhythm. The internal fundamentals have not formed a trend resonance. It is expected to operate in the range of 6.95–7.05 with a slight upward bias in the short term, and the appreciation pace will slow down after breaking 7 [40]. Summary by Relevant Catalogs Quantity - Price and Policy Signals Quantity - Price Observation - The implied volatility curve of the 3 - month USD/CNY option shows an appreciation trend of the RMB, with the volatility on the Put side higher than that on the Call side, and the overall implied volatility shows an upward trend [4]. Policy Observation - The counter - cyclical factor remains in the negative range but has not been activated. There is a fluctuation in the three - month CNH HIBOR - SHIBOR spread [7]. Fundamentals and Views Macro - Economy - **Interest Rate Cut and Liquidity**: There is a divergence in the pricing of interest rate cuts between the US and Europe. The TGA account balance was 861.4 billion on December 17 (previous value: 805.8 billion), and the reserve balance of depository institutions in October was 2.94 trillion (- 123.4 billion). The pace of interest rate cuts by non - US central banks has generally slowed down, and some have shifted to expectations of interest rate hikes [14]. - **Fed Chair Candidates**: The core competition is between Waller, Hassett, and Warsh. Market probabilities show Hassett leading, but Trump highly trusts Bessent. If Waller wins, it may trigger a reversal trade of "the Fed losing its independence", which is positive for overall US dollar assets and negative for gold, and the market may reduce expectations for interest rate cuts next year. If Hassett wins, it may trigger the market's "muscle memory" of "the Fed losing its independence", which is negative for overall US dollar assets and positive for gold, and the market may raise expectations for interest rate cuts next year [17]. - **US Economic Data**: The US economic data has generally exceeded expectations, but the pace of interest rate cuts remains unchanged. Non - farm payrolls exceeded expectations, the CPI increase in November was lower than expected, which supports subsequent interest rate cuts. The PMI has declined slightly, and real estate sales in November increased slightly [19]. - **Inflation**: The US CPI in November was lower than expected. The contributions of food and core commodities decreased, the contribution of crude oil increased, and the contribution of core services decreased. There is a divergence between CPI and PMI [20]. - **Non - farm Payrolls in November**: Compared with September, the non - farm payrolls in November continued to weaken, with only the construction industry showing improvement. In the unemployment rate, re - employment and temporary unemployment had negative contributions, indicating a change in the employment environment [22]. - **Chinese Economy**: There is a situation of strong expectation but weak reality in the Chinese economy. In November, imports and exports showed resilience, but there is still great pressure on fixed - asset investment, and consumption has slowed down. Against the background of increasing marginal pressure, the government's policy window has loosened, and the gap between fundamentals and sentiment has widened [24]. Settlement and Sale of Foreign Exchange - The supply and demand of foreign exchange are generally balanced. The surplus of bank settlement and sale of foreign exchange has fallen to 15.65 billion US dollars, and although the surplus continues, it is gradually weakening at the margin. The scale of settlement and sale of foreign exchange has not significantly increased or decreased, and the marginal guidance of single - month data on the exchange rate has declined. Enterprises' spot - end operations tend to be rational, with the settlement rate of foreign exchange receipts falling to 51.99% and the purchase rate of foreign exchange payments falling to 60.30%. Enterprises maintain a balanced payment and receipt management, and there is no concentrated settlement or sale of foreign exchange. On the forward end, the management is mainly about existing risks. The demand for new forward hedging has cooled down, and the performance shows a divergence of "decrease in settlement and increase in purchase". The net forward settlement of foreign exchange that has not expired continues to rise, and the hedging structure is stable without showing directional bets [31]. Foreign - related Receipts and Payments - The overall surplus has significantly narrowed, but the structure is stable. The surplus of domestic banks' agency foreign - related receipts and payments has declined. Both the current account and the capital and financial account have weakened simultaneously, reflecting a rhythm adjustment rather than a directional change. The surplus foundation of the current account is still solid. The current account surplus has decreased from 74.66 billion to 55.24 billion US dollars, mainly due to the stable export rhythm and the marginal repair of imports. The goods trade surplus is still as high as 72.67 billion US dollars, indicating the resilience of the foreign trade fundamentals. The service trade deficit has expanded to - 6.42 billion US dollars, weakening the support for the surplus. The capital and financial account has a structural outflow, but the pressure has eased. The capital account deficit has expanded to - 38.61 billion US dollars, among which the securities investment deficit has significantly narrowed, and the direct investment deficit has slightly improved. There is no concentrated outflow in a single channel, and cross - border capital flows remain controllable [36]. Overall Viewpoint - The current situation shows that the difference in economic expectations is favorable for the RMB. The US employment and business activities have cooled down simultaneously, with the unemployment rate rising to 4.6% and the wage growth rate falling to 3.5%. In the same period, China's economic growth - stabilizing policies have continued to take effect, and exports and the current account surplus are robust. The Sino - US interest rate difference is neutral. Under the Fed's interest rate - cut cycle, the real return advantage of the US dollar has converged, while China's monetary policy maintains a stable orientation and the interest rate system is stable. The uncertainty of trade policy is neutral. The US trade and industrial policies towards China still have uncertainties, but the adjustment rhythm has slowed down. China's export market continues to diversify, the trade surplus has reached a record high, and the external demand structure is stable [40]. 2026 Scenario Deduction - There are multiple important events and turning points throughout 2026, including the Fed chair candidate situation at the end of 2025, OPEC and FOMC meetings in January, the government work report in February, the National People's Congress and the Chinese People's Political Consultative Conference in March, the expiration of Powell's term in May, the FOMC meeting on June 18, the El Nino situation in June, the Politburo meeting in July, the FOMC meeting on September 29, the US mid - term elections on November 3, and the postponement of the expiration of Sino - US tariffs on November 10. These events are related to policy expectations, inventory cycles, and economic re - balancing, which will have an impact on the economic situation [43].

Core Viewpoint - The resilience of the RMB exchange rate is supported by factors such as net cross-border capital inflows, balanced foreign exchange settlement, stable market expectations regarding exchange rate fluctuations, and active foreign exchange market trading [1] Economic Fundamentals - China's economy is showing steady improvement, with positive progress in economic restructuring and a strong growth momentum, making it likely to achieve a GDP growth target of around 5% for the year [1] - The anticipated start of the Federal Reserve's interest rate cut cycle in September may lead to a weaker USD, potentially driving RMB appreciation and increasing corporate foreign exchange settlement demand, especially in the fourth quarter [1] Exchange Rate Mechanism - The CFETS RMB exchange rate index provides a comprehensive reflection of the value changes of the currency, incorporating major foreign currencies such as USD, EUR, GBP, and JPY, calculated using trade-weighted methods [1] - The introduction of the "counter-cyclical factor" has effectively mitigated market pro-cyclical behavior and stabilized market expectations since its implementation in 2017 [3] Policy Responses - The People's Bank of China (PBOC) has a range of policy tools to enhance the RMB exchange rate's flexibility and maintain stability, including counter-cyclical factors, offshore liquidity management, and foreign exchange reserve interventions [2] - The recent alignment of the RMB central parity with market trading prices indicates a high degree of market confidence, with many quoting banks moving away from using the counter-cyclical factor [2] Future Outlook - The RMB exchange rate is expected to be more determined by market supply and demand, with a projected central level of around 7.0 against the USD by 2026, potentially peaking near 6.8 [4] - The core factors driving the RMB/USD exchange rate in the first half of 2026 are anticipated to be economic recovery, while a slight decline may occur in the second half of the year [4]

Core Viewpoint - The offshore RMB has surpassed the 7.0 mark against the USD for the first time in 2024, reaching a high of 6.9985, while the onshore RMB also broke the 7.01 threshold, marking a new high since September 27, 2024 [1][2]. Group 1: Market Dynamics - The 7.0 level is a significant "watershed" for the RMB exchange rate, causing market participants to hold their breath as it approaches [2]. - The short-term probability of the RMB breaking 7 is high, but sustaining below this level in the long term faces multiple uncertainties [3]. - The recent RMB appreciation is attributed to a combination of factors that have been building up over time [4]. Group 2: External Influences - The weakening of the USD index has created favorable external conditions, with the Federal Reserve entering a rate-cutting cycle since September, reducing rates by a total of 75 basis points this year [5][8]. - The expectation of continued rate cuts by the Federal Reserve has led to a significant drop in the USD index, facilitating the appreciation of the RMB and other non-USD currencies [8]. Group 3: Domestic Factors - The People's Bank of China (PBOC) has adopted a relaxed stance towards the RMB's appreciation, allowing the currency to strengthen without intervention, as indicated by the adjustment of the counter-cyclical factor to a positive value [9][11]. - Year-end corporate foreign exchange settlements have contributed to the RMB's appreciation, as companies convert their foreign earnings into RMB [12][13]. Group 4: Economic Context - The current RMB appreciation reflects a broader struggle for "pricing power" and "game rules" in the global market, with the U.S. attempting to reverse its industrial hollowing through protectionist measures [16][17]. - China's response has been to avoid excessive competition and allow the RMB to appreciate, thereby shifting costs to Western economies [18][21]. - The recent trade surplus exceeding $1 trillion for the first 11 months of the year indicates China's strong export performance amid these dynamics [18]. Group 5: Strategic Implications - The current RMB appreciation is seen as a strategic move by the state to prepare for manufacturing upgrades, although there may be measures to control rapid appreciation in the short term [21][22].

Core Viewpoint - The recent appreciation of the RMB is not primarily driven by "settlement" but rather influenced by a weaker USD and central bank interventions, with settlement rates showing a decline rather than an increase [2][3][4]. Group 1: RMB Appreciation and Settlement - Since mid-October, the RMB has appreciated significantly by 1.42% against the USD, while the USD index only weakened by 0.34%. This has sparked discussions about a potential "year-end settlement wave" [3][4]. - Despite the RMB's appreciation, the settlement rate has decreased from 63.1% in September to 54.1% in October and 52.0% in November, indicating that the expected settlement wave has not materialized [3][4][8]. - Various indicators suggest that a settlement wave typically leads to higher swap points, increased RMB transaction volumes, and reduced foreign exchange deposits. However, since November, swap point spreads have decreased from 97 pips to 36 pips, and foreign exchange deposits have continued to grow [3][4][19]. Group 2: Year-End Settlement Patterns - Historically, "year-end settlement" tends to occur in December due to increased current account income, but improvements in settlement rates are not significant. The growth in settlement amounts is attributed to concentrated export receipts in Q4, significant increases in primary and secondary income, and slight increases in settlement rates [4][19]. - The changes in year-end settlement rates are influenced by prior RMB performance and the timing of the Spring Festival. When the RMB strengthens, the selling rate typically declines, while improvements in settlement rates often lag by 1-2 quarters [4][55]. Group 3: Potential for RMB to Break "7" - A delayed settlement wave may provide some short-term support for the RMB, with historical data indicating that after two consecutive quarters of appreciation, settlement rates tend to improve. The upcoming Spring Festival may also extend this improvement into January [4][77]. - However, risks associated with a potential USD rebound and central bank interventions may affect the pace at which the RMB breaks the "7" level. Current non-commercial short positions in the USD have reached a record high, indicating a risk of reversal [4][88].

Core Viewpoint - The recent appreciation of the RMB is not primarily driven by "settlement" but rather influenced by a weaker USD and central bank interventions, with settlement rates showing a decline rather than an increase [2][3][4]. Group 1: RMB Appreciation and Settlement - Since mid-October, the RMB has appreciated significantly by 1.42% against the USD, while the USD index has only weakened by 0.34%. This has sparked discussions about a potential "year-end settlement" [3][8]. - Despite the RMB's appreciation, the settlement rate has decreased from 63.1% in September to 54.1% in October and further to 52.0% in November, indicating that the expected settlement surge has not materialized [3][8]. - Various indicators suggest that a settlement surge typically leads to higher swap points, increased RMB transaction volumes, and reduced foreign exchange deposits. However, since November, swap point spreads have decreased from 97 pips to 36 pips, and foreign exchange deposits have continued to grow [3][19]. Group 2: Year-End Settlement Patterns - Historically, "year-end settlement" tends to occur in December due to increased current account income, but improvements in settlement rates are not significant. The growth in settlement amounts is attributed to concentrated export receipts, increased primary and secondary income, and a slight rise in settlement rates [4][43]. - The changes in year-end settlement rates are influenced by prior RMB performance and the timing of the Chinese New Year. Typically, when the RMB strengthens, the selling rate declines, while improvements in settlement rates lag by 1-2 quarters [4][55]. Group 3: Potential for RMB to Break "7" - A delayed settlement surge may provide some short-term support for the RMB, with historical data indicating that after two consecutive quarters of appreciation, settlement rates often improve. The upcoming Chinese New Year may also extend this improvement into January [5][112]. - However, risks of a USD rebound and central bank interventions may affect the pace at which the RMB breaks the "7" level. Current non-commercial short positions in the USD are at a record high, indicating potential reversal risks [5][88].

1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints - Short - term, the US dollar index is expected to fluctuate between 99 - 101. Its ability to firmly return above 100 depends on the US government's reopening negotiation deadline and the quality of economic data after reopening [1][19]. - This week, the USD/CNY spot exchange rate is expected to range from 7.10 to 7.15. Near the end of the year, it may show a "shifting down of the oscillation bottom" trend, with a low probability of significant one - sided depreciation [1][19]. - There's no need to over - worry about the decline in China's import and export data in October. The trade data has short - term "noise", and the export data in October is a replenishment for the high growth in September. The export growth rate may decline in the fourth quarter, but the annual foreign trade is expected to end smoothly [1][19][21]. 3. Summary by Directory 3.1 One - Week Market Review and Outlook 3.1.1 Foreign Exchange Market Review - **US Market**: The adjustment of US stocks was triggered by warnings from Goldman Sachs and Morgan Stanley at a summit. The US government shutdown affected data release. ADP employment in October exceeded expectations, but the labor market is under pressure. The market's expectation of the Fed's interest - rate cut fluctuated, and the US dollar index lost the 100 mark and then rebounded and fell [2][5]. - **European and UK Markets**: The Bank of England kept the benchmark interest rate at 4.0%, with a 5 - 4 vote split. High inflation in the UK restricted interest - rate cuts. Sweden and Norway also maintained their policies [6]. - **Japanese Market**: The minutes of the Bank of Japan's policy meeting indicated that the pre - conditions for restarting interest - rate hikes were gradually being met, strengthening the market's expectation of a policy shift and causing fluctuations in the Japanese bond market [6]. - As of November 7, 16:30, the US dollar index depreciated, the on - shore and off - shore RMB depreciated against the US dollar, while the Japanese yen, euro, and British pound appreciated against the US dollar [7]. 3.1.2 Weekly Review of USD/CNY Spot Exchange Rate - Last week, the USD/CNY spot exchange rate showed an inverted V - shape, fluctuating within the 7.10 - 7.14 range as predicted [15]. 3.1.3 Market Outlook - The short - term trend of the US dollar index and the USD/CNY spot exchange rate is as mentioned in the core viewpoints. There's no need to over - worry about the decline in China's import and export data in October [19][21]. 3.2 RMB Market Observation 3.2.1 Policy Tool Tracking - Counter - Cyclical Factor - As of last Friday, the central parity rate of the USD/CNY exchange rate was 7.0836, depreciating 44 basis points. The counter - cyclical factor shows that the central bank aims to stabilize the exchange rate [23]. 3.2.2 Investor Expectations and Sentiment Tracking - **Enterprise Sector Expectations**: In September 2025, China's foreign exchange market was stable. Cross - border capital flows were active and balanced, and foreign exchange supply and demand were relatively balanced. There was a small net outflow in September due to the holiday, which turned into an inflow in October [26][27]. - **Overseas Investor Expectations**: As of last Friday, the depreciation sentiment of overseas investors towards the RMB slightly declined [31]. - **Professional Investor Expectations**: The 1 - year NDF closing price of the USD/CNH rose. In the short - to - medium term, the market's sentiment towards RMB appreciation and depreciation changed little, while the long - term appreciation sentiment increased [33]. 3.2.3 Derivatives Market Tracking - **Hong Kong RMB Futures Market**: Relevant figures show the trading situation of the Hong Kong Exchange's USDCNH futures main contract [36]. - **Singapore RMB Futures Market**: Figures present the trading situation of the Singapore Exchange's USDCNH futures main contract and the basis difference with the Hong Kong Exchange [43]. 3.3 Key Data and Events to Focus On 3.3.1 One - Week Global Key Events Review - **China**: The central bank's open - market operations had a net injection of 200 billion yuan. Service trade imports and exports increased in the first three quarters. China announced measures to implement the consensus of the China - US economic and trade consultations. Some export control measures were suspended, and some US entities' trade qualifications were restored. In October, foreign trade maintained growth, and foreign exchange reserves and gold reserves increased [47][48]. - **US**: The number of corporate layoffs reached a high level since 2020. The ISM manufacturing PMI in October was in contraction, ADP employment exceeded expectations, the ISM services PMI reached a new high, and consumer confidence was at a low level [49][50]. - **UK**: No significant events [51]. - **Eurozone**: The manufacturing PMI in October was 50, and the services PMI drove the composite PMI to a new high. Germany's service industry recovered strongly, while France's was in contraction [51]. - **Japan**: Nominal wages increased in September, supporting the Bank of Japan's tightening policy [52]. - **Others**: South Korea's CPI accelerated in October, which may lead to the central bank continuing to suspend interest - rate cuts [53]. 3.3.2 One - Week Global Central Bank Key Statements Summary - **China's Central Bank**: No relevant statements [54]. - **Federal Reserve**: Different Fed officials had different views on interest - rate cuts, adding uncertainty to the December decision [54][55]. - **Bank of Japan**: The prime minister hoped for appropriate policies, and the meeting minutes showed a cautious attitude towards interest - rate hikes [56]. - **European Central Bank**: Officials believed there was no reason to adjust borrowing costs but remained vigilant about inflation [57]. - **Bank of England**: The bank kept the interest rate at 4%, with internal differences intensifying and increasing the expectation of a December interest - rate cut [58]. - **Others**: The Reserve Bank of Australia kept the key interest rate unchanged and warned of inflation pressure [59]. 3.3.3 Key Financial and Economic Data and Events to Focus on This Week - A series of important economic data from different regions such as the UK unemployment rate, China's M2 money supply, and the US CPI are to be released this week [60]. 3.4 International Market Conditions 3.4.1 Major Countries' Exchange Rate Conditions - Figures show the exchange rate trends of the US dollar against major currencies such as the euro, yen, and pound [62][64][68]. 3.4.2 Correlation of Major Asset Classes - Figures display the trends of assets such as London gold, VIX, WTI crude oil, and the S&P 500 index [83][84][87]. 3.4.3 Capital Situation - Figures present the central bank's open - market operations, Shibor, and SOFR quotes [92][94]. 3.4.4 China - US Interest Rate Spread - Figures show the trends of the China - US interest rate spread and the yields of 10 - year Chinese and US Treasury bonds [96][97]. 3.4.5 RMB Exchange Rate Index - Figures show the trends of the CFETS, BIS, and SDR RMB exchange rate indices [100]. 3.4.6 Global Economic and Trade Friction Tracking - Figures show the monthly value of the global economic and trade friction index and the year - on - year and month - on - month changes in the amount involved in relevant measures [102][104].

1. Report's Industry Investment Rating - Not provided 2. Core Viewpoints of the Report - Despite Trump threatening to impose 100% tariffs on Chinese goods and then signaling willingness to reach an agreement, the RMB exchange - rate implied volatility remained low, and the impact of this trade friction on the exchange - rate market was far lower than during the April reciprocal tariff period [2] 3. Summary by Related Content Reasons for the Stable Performance of the RMB - After the holiday, the domestic central parity rate was continuously raised, and the adjustment range of the counter - cyclical factor increased, sending a "stable exchange - rate" signal to support the RMB [2] - The US faces risks such as government shutdown and a weakening labor market, which may increase the US demand for an agreement, and the market has pre - digested this round of tariff friction [2] - The Sino - US swap points have further narrowed, reducing the impact of Carry on the RMB spot exchange rate [2]

Core Viewpoint - The recent increase in China's foreign exchange reserves to $3.34 trillion contrasts sharply with the depreciation of the RMB against the USD, raising questions about the effectiveness of reserve accumulation in stabilizing the currency [2] Group 1: Data Paradox - The growth in reserves is accompanied by concerns over structural imbalances, with the proportion of USD assets falling to 58% from a peak of 73% in 2014, while holdings in EUR, JPY, and gold have increased to 32% [2] - The opportunity cost of holding USD assets is significant, with a yield of 2.3% compared to 4.8% for 10-year US Treasury bonds, resulting in an annualized opportunity cost exceeding $15 billion [2] - The RMB depreciation is driven by three main factors: widening interest rate differentials, narrowing trade surpluses, and diverging policy expectations [2] Group 2: Arbitrage Opportunities - The onshore-offshore price gap for the RMB has widened, creating an arbitrage opportunity with a potential annualized return of 1.9% [2] - The offshore RMB liquidity has tightened, as indicated by the spike in CNH Hibor to 13.4%, the highest since 2013, increasing the cost of arbitrage [2] - The derivatives market shows a 2.1% arbitrage opportunity between NDF and DF rates, with a significant increase in foreign institutional trading volume [2] Group 3: Policy Responses - The central bank has reactivated counter-cyclical factors in the exchange rate management model, adjusting the counter-cyclical coefficient to 0.8 to limit depreciation [2] - Capital controls have been tightened, requiring banks to conduct thorough reviews of large foreign exchange transactions, particularly in technology and real estate sectors [2] - The central bank has signaled stability by emphasizing the adequacy of reserves to manage short-term fluctuations and has increased gold holdings to diversify reserve assets [2] Group 4: Underlying Contradictions - Concerns about the quality of reserves are rising, particularly regarding the liquidity risks associated with the $1.1 trillion in US Treasury bonds held by China [2] - The balance between market-driven and interventionist approaches in exchange rate formation is challenged, with a significant increase in direct interventions by the central bank [2] - The real effective exchange rate has appreciated by 23% since 2015, impacting export competitiveness and increasing import costs for key commodities [2] Group 5: Future Outlook - Short-term arbitrage opportunities are expected to narrow by Q4 2025 as the US Federal Reserve nears the end of its rate hike cycle [2] - Long-term reforms are anticipated, including optimizing reserve structures and enhancing the flexibility of the RMB exchange rate [2] - The need for a new balance in reserve management, exchange rate mechanisms, and industrial upgrades is emphasized to ensure sustainable financial security [2]

Core Viewpoint - The article discusses the current trends and potential future movements of the RMB exchange rate, highlighting the similarities and differences with the 2018-2019 period, and emphasizes the importance of economic fundamentals in determining the exchange rate trajectory [4][5][9]. Historical Comparison - The current macroeconomic backdrop for RMB appreciation shares similarities with the period from November 2018 to June 2019, particularly in terms of improved expectations for US-China relations and the performance of RMB assets despite a lack of clear economic recovery signals [5]. - From November 2018 to June 2019, the RMB appreciated from 6.97 to around 6.7, while the current appreciation from the peak of 7.35 on April 9, 2025, has reached the 7.11-7.12 range, indicating a comparable magnitude of appreciation [5]. Current Special Factors - There is a significant backlog of unconverted foreign exchange, estimated at approximately $700-800 billion, which could amplify exchange rate fluctuations and create short-term market movements [7]. - The backlog is concentrated in two key exchange rate ranges: $400-500 billion in the 7.2-7.5 range and $200-300 billion in the 6.9-7.2 range, which may trigger a surge in conversions if the RMB appreciates beyond these levels [7][8]. Future Outlook - The article suggests that a trend of sustained RMB appreciation is unlikely without clear economic signals, as historical trends in 2017 and 2020 were supported by significant improvements in economic fundamentals, particularly PMI and corporate conversion rates [9][10]. - Even if the economic fundamentals improve, the initial stages of appreciation may be moderated by policy measures to prevent excessive volatility and capital inflows, which could complicate cross-border capital management [10][14]. - The current global trade environment necessitates a balanced approach to maintain stable trade relations with the US while expanding non-US trade, suggesting that a stable exchange rate may be the optimal strategy [14].

Core Viewpoint - The article discusses the recent trends in the RMB exchange rate, highlighting similarities with the macroeconomic context of late 2018 to mid-2019, including low domestic PMI, rising RMB assets, and improved expectations for Sino-US relations [2][8]. Group 1: Main Line, Trading Factors, and Policy Push - The RMB exchange rate trend is primarily driven by fundamental economic data, particularly exports and PMI [4][15]. - Currently, there is marginal improvement in the net settlement rate, but the domestic manufacturing PMI remains low, indicating a need for further confirmation of trend improvement [5][15]. - Two uncertain factors that may amplify exchange rate fluctuations are identified: the potential release of accumulated settlement and the emotional changes stemming from Sino-US interactions [6][21]. Subgroup: Accumulated Settlement Release - The estimated accumulated settlement as of July is approximately between $743.3 billion and $892.6 billion, with a median of around $818 billion [22][23]. - The average weighted exchange rate cost of these accumulated settlements is estimated to be between 7.02 and 7.17, with significant amounts concentrated around the 6.9 to 7.2 range [23]. - The exchange rate of 7.0 is highlighted as a critical threshold, where approaching this level may lead to accelerated settlement and increased volatility [23]. Subgroup: Emotional Changes from Sino-US Contact - The recent strengthening of the RMB is supported by improved expectations regarding Sino-US relations, with historical parallels drawn to the period from November 2018 to June 2019 [30][31]. - The current macroeconomic context shares similarities with the past, including low PMI and a rebound in A-shares, suggesting potential for further RMB appreciation [31][32]. Subgroup: Policy Intent - The article notes a rare occurrence where the counter-cyclical factor remains significant during a period of RMB appreciation, indicating policy support for the strengthening trend [9][35]. - The counter-cyclical factor shadow has shown significant activity, particularly since the Geneva trade talks, suggesting a policy-driven influence on the exchange rate [35][38]. Group 2: Comprehensive Assessment of RMB Exchange Rate - The current valuation of the RMB against the USD is considered relatively high compared to the fitted midpoints based on Sino-US interest rate differentials, while the CFETS RMB index remains slightly undervalued [40][41]. - The RMB's valuation against a basket of currencies is deemed reasonable, with potential for appreciation based on export competitiveness [40][41]. Subgroup: Three Aspects of the Current Exchange Rate - The bank's customer settlement surplus has expanded, indicating improved settlement fundamentals [48]. - Both resident and enterprise expectations have shown signs of recovery, with residents' expectations reflected in the implied exchange rate of gold and enterprises' expectations indicated by the net settlement rate [50][52]. - Trading volumes in the onshore foreign exchange market have increased, suggesting heightened market sentiment and potential for RMB appreciation [56]. Subgroup: Policy Impact - The counter-cyclical factor shadow has increased friction on the depreciation side, indicating a policy stance aimed at stabilizing the RMB [59].