Will the RMB continue to appreciate strongly?

  In the past three years, the onshore Chinese yuan has experienced two rounds of significant appreciation against the US dollar, with this round being the third. The first round of appreciation started from the low point of 7.1765 at the end of May 2020 and lasted for more than a year until the high point of 6.3040 in early March 2022, with a cumulative maximum appreciation of over 8700 basis points. The second round of RMB appreciation started from the low point of 7.3280 in early November 2022 and quickly rose to the high point of 6.6896 in mid January 2023. In just over two months, the appreciation was over 6300 basis points, much faster than the first wave.   However, the maximum appreciation of the RMB in this round is only over 2000 basis points, and compared to history, there may still be significant room for appreciation.
  Looking ahead to the future trend of the RMB exchange rate, Wang Youxin, a senior researcher at the Bank of China Research Institute, said, "The RMB exchange rate is gradually entering a turning point, and the appreciation channel is gradually opening up. It is currently in the preliminary stage. In the short term, there may be some fluctuations, but around the end of the year, with further dynamic changes in domestic and international situations, more positive factors will emerge domestically, and the RMB will continue to rebound next year."
Li Liuyang, Chief Analyst of Foreign Exchange Research at CICC Research Department, predicts, "We believe that the rebound of the RMB exchange rate in this round is likely not over yet. This is because at the end of previous years, there are several factors that support the exchange rate: seasonal foreign exchange settlement, reflexivity, export recovery, and the possibility of further decline in the US dollar index."
  Li Liuyang specifically mentioned that a large amount of unsettled trade surplus is likely to mean that once market expectations for exchange rates change, the RMB exchange rate may significantly rebound. "Statistics have found that in the previous five rounds of RMB exchange rate depreciation, there were four significant rebounds in the three months after the exchange rate hit bottom, with an average increase of 4.2%. We believe that the entry of potential foreign exchange settlement demand will be a major force driving the recovery of the RMB exchange rate."
  According to a research report released by Everbright Securities, looking ahead to 2024, the economic and monetary policy cycles of China and the United States are expected to shift from divergence to convergence, driving the renminbi into an appreciation channel, but the space is limited by the magnitude of the decline in the US dollar index. In the short term, it is expected that the USD/RMB exchange rate will enter a two-way fluctuation range at the 7.1 level. In terms of the interest rate spread between China and the United States, the short-term downward rate of US bond yields will marginally slow down after rapidly trading the expectation of the end of the interest rate hike cycle and economic cooling; From the perspective of the domestic economy, the Central Economic Work Conference is expected to further increase the efforts of stabilizing growth policies and provide marginal support for the RMB exchange rate.