On August 18, the offshore RMB exchange rate ushered in a strong appreciation trend, breaking the 6.74 mark intraday and hitting a new high in more than three years, reflecting rising attractiveness of RMB-denominated assets. The strong RMB performance is driven by three superimposed positive factors: three consecutive days of US dollar index decline, warming expectations for domestic economic recovery, and rebounding cross-border capital inflows, forming a structural reversal trend in the cross-border exchange rate market.

In terms of US dollar trends, market expectations for the Federal Reserve’s prolonged high interest rates have cooled down. Coupled with exposed long-term debt risks and intensified fiscal pressure in the United States, the US dollar index continued to weaken, creating a loose environment for the appreciation of non-US currencies. Meanwhile, China’s policies to stabilize consumption and investment have been continuously implemented. July economic data demonstrates the resilience of domestic demand recovery, steadily boosting market confidence in China’s economic rebound and driving foreign capital to increase holdings of RMB bonds and equity assets.

Foreign exchange market analysis shows that the RMB exchange rate has broken away from the previous volatile depreciation pattern and entered a steady appreciation channel. This trend helps reduce cross-border exchange costs for enterprises, stabilize the operating expectations of foreign trade enterprises, and benefit the recovery of import and export trade.

In addition, a strong RMB will continuously attract overseas long-term capital to deploy in China’s capital market, consolidate the foundation for the stable recovery of A-shares and the bond market, promote the two-way opening and stable development of the domestic financial market, and further enhance the international recognition and influence of the RMB in global cross-border transactions.