Core Viewpoint - The Chinese Yuan (CNY) is approaching the 7.05 mark against the US Dollar (USD), with concerns about the possibility of breaking the 7.00 level by year-end being raised. However, the expectation remains that the CNY will end the year around 7.05, with a low probability of breaking 7.00 [1][8]. Group 1: Baseline Scenario - The strong settlement power observed daily supports the expectation of a CNY appreciation, although the pace is expected to be moderate. The focus this week is on the realization of the "three-price unity" for the USDCNY central parity, which has been maintained for over a year [2][8]. - The baseline scenario predicts that the USDCNY central parity will be around 7.05 by year-end, corresponding to a closing range of 7.04-7.06 [8][12]. Group 2: Right Tail Risks - Potential upward risks for the CNY include factors that could drive a rebound in the US Dollar Index (DXY), such as a hawkish Federal Open Market Committee (FOMC) stance leading to a significant market reaction. Current market expectations suggest a 25 basis point rate cut in December, with an additional 2.3 cuts anticipated next year. If the December dot plot indicates only one cut for 2026, both the dollar rates and DXY could rebound sharply [6][10]. - Additionally, stronger-than-expected non-farm payrolls in October and November could also contribute to upward pressure on the USD [12]. Group 3: Left Tail Risks - Conversely, if the DXY falls below the 100-day moving average towards the previous low of around 97, the CNY may also decline. Potential triggers for this scenario include a dovish FOMC stance indicating more than two rate cuts for 2026, or significant dovish comments from the new Federal Reserve Chair [6][12]. - Other factors that could lead to a weaker CNY include disappointing non-farm payroll results and rising unemployment rates, as well as a comprehensive peace agreement between Russia and Ukraine, which could strengthen the Euro [12].

Core Viewpoint - In late August, the RMB experienced a rapid appreciation against the backdrop of a weak US dollar index, strong central bank midpoint pricing, and attractive domestic equity market performance, leading to a new low for the USD/CNY exchange rate this year [1] Group 1 - The RMB exchange rate is expected to remain strong in the short term, gradually returning to a "three-price unification" [1] - If the RMB can maintain a strong trend as the year-end approaches, the demand for settlement is likely to continue supporting the RMB exchange rate [1] - The current domestic fundamentals are primarily providing a floor for the exchange rate, with foreign capital inflow into the equity market but facing outflow pressure in the bond market [1] Group 2 - A breakthrough of the 7 level for the RMB exchange rate will require additional catalysts [1]