After breaking several resistance levels, the yuan returned to its late January high against the dollar.
In the past three months, the overall appreciation of the RMB against the US dollar has continued recently after returning to the "sixth era" in July.
Analysts believe that a weaker DOLLAR, China's continued economic recovery and the attractiveness of renminbi assets are important factors for the yuan's appreciation.
In general, the exchange rate of RMB against THE US dollar is flexible and shows two-way fluctuation around a reasonable and balanced level.
The midpoint hit its highest level in more than seven months
On August 27, the central parity rate of the RMB against the US dollar reached 6.8903 yuan, a new high in more than seven months.
The onshore yuan recovered 6.88 yuan against the US dollar to close at 6.8794 yuan.
As of 16:50 on August 27, the offshore RMB was trading at 6.8759 yuan against the US dollar.
In late May, the yuan began a round of appreciation against the dollar, continued to rise since June, broke through the March high in mid-August, and recently returned to its late January level.
In addition, the yuan is appreciating against the euro.
Between mid-July and the end of the month, the renminbi weakened against the euro, hitting its lowest level in more than six years.
Since August, the RMB has fluctuated and appreciated against the euro. As of 16:50 on August 27, the EXCHANGE rate of the RMB against the euro has rebounded by more than 1000 points since the end of July.
It is worth noting that from May to July, monthly data show that THE CFETS RMB exchange rate index, BIS currency basket RMB exchange rate index and SDR currency basket RMB exchange rate index are all in a downward trend.
Even in June and July, when the renminbi continued to appreciate against the dollar, the indices generally fell.
But weekly data so far since August have shown gains across the board.
Three factors are driving the appreciation
Analysts cited a weaker DOLLAR, China's economic recovery and the attractiveness of renminbi assets as three reasons for the yuan's rise.
Since late May, the DOLLAR index has started to decline, hitting a low of 92.12 in mid-August, its lowest level since early May 2018.
At present, the dollar index is still in the bottom volatility, at more than two years low.
At present, China is leading the world in epidemic prevention and control and economic recovery.
Earlier, the International Monetary Fund ranked China as the only major economy likely to report positive growth this year in its World Economic Outlook.
Economic data for July showed a steady recovery in China's economy.
Continued high interest rate differentials also make renminbi assets more attractive.
Take the spread between the US and China as an example. As of August 26, the spread between the us and China 10-year Treasury bonds was 236 basis points.
Data show that foreign institutions held 2.67 trillion yuan of Chinese bonds at the end of July 2020, an increase of 484.7 billion yuan from the end of 2019.
In mid-August, the People's Bank of China successfully issued 30 billion yuan of central bank bills in Hong Kong.
The people's Bank of China said the offering had been widely welcomed by foreign investors, with bids totalling nearly 2.1 times the amount issued, indicating that renminbi assets were attractive to foreign investors and reflecting global investors' confidence in the Chinese economy.
Two-way fluctuation is very elastic
On the whole, since the beginning of this year, the RMB exchange rate against the US dollar is flexible and relatively tough, reflected in the "top, bottom".
In January, in the face of a warmer external environment, the RMB continued to appreciate against the US dollar, briefly returning to the level of last July.
However, from February to the end of May, the epidemic spread around the world, market sentiment turned pessimistic, and the RMB was also bearish, depreciating in the volatility.
Since June, as China has made significant progress in epidemic control and economic recovery, the RMB bulls have gradually gained the upper hand.
Look for a long time, since the first "break 7" in August last year, the RMB against the DOLLAR exchange rate around the price center two-way fluctuation trend.
A few days ago, the People's Bank of China monetary policy department of youth group, the RMB exchange rate regime reform will continue to adhere to market-oriented direction, optimizes the allocation of financial resources, increase the elasticity of exchange rate, pays more attention to guidance and communication with the market expected, under the framework of general equilibrium on the RMB exchange rate at a reasonable and balanced level basically stable.
Looking ahead, CMG believes that in the short term, the global economic recovery process and international environmental changes will continue to have an impact on the RMB volatility.
However, with China leading the way in economic recovery and foreign capital flooding in, the exchange rate is expected to stabilize.
Based on various factors, it is expected that the RMB exchange rate index against a basket of currencies will appreciate to some extent in the short term.