The Strong Rebound Of The RMB

  Since November, the onshore and offshore RMB exchange rates have changed their horizontal consolidation trend over the past two months and started a significant rebound. The spot exchange rate of the Chinese yuan against the US dollar has accumulated an appreciation of 1866 points, with a cumulative increase of 2.55%. The highest rise within the month exceeded the 7.12 mark, reaching a new high in over five months.
  Specific data shows that the onshore Chinese yuan rose to a maximum of 7.11194 against the US dollar and dropped to a minimum of 7.3199; The offshore RMB rose to a maximum of 7.1121 against the US dollar and dropped to a minimum of 7.3420.
Image source: Xinhua Finance and Economics
  The China International Capital Corporation (CICC) research report pointed out that external factors experienced significant changes in early November, with weak US economic data and a dovish Federal Reserve driving down US bond rates and the US dollar index. This is the direct reason for triggering the appreciation of the RMB exchange rate.
  Everbright Securities also stated that the two main driving forces for the appreciation of the Chinese yuan in November were the narrowing of the US China interest rate spread and the cooling of US economic data. On the one hand, since late October, driven by the expectation of the end of the interest rate hike cycle and the slowing pace of US bond issuance in the fourth quarter, the yield of 10-year US Treasury bonds has rapidly fallen, and the interest rate spread between China and the United States has narrowed; Secondly, the general cooling of US retail and inflation data in October has driven market confirmation that the US China economic cycle is expected to gradually narrow from divergence.
  Overseas capital's quietly increasing holdings of RMB bonds is also an indispensable contribution. Data shows that in the past two months, overseas capital has continuously increased its holdings of RMB bonds, with an increase of approximately RMB 20 billion in September and over RMB 40 billion in October, marking the largest monthly increase in holdings in the past four months.