On December 25th, the offshore RMB exchange rate against the US dollar continued to strengthen, breaking through the key threshold of 7.0 and hitting an intraday low of 6.9920, marking the RMB’s breach of the important psychological level of “7”.

Meanwhile, the onshore RMB exchange rate against the US dollar broke through the threshold of 7.01 and was last quoted at 7.0068, hitting a new high since September 27, 2024.

Regarding the reasons for this round of RMB appreciation, the market generally believes that it is mainly a passive gain, driven by the overall weakness of the US dollar as the US Dollar Index has recorded a notable decline with the drop approaching 10%. Coupled with the strong performance of the domestic equity market, which has attracted foreign capital inflows, the RMB exchange rate against the US dollar has maintained a steady upward trend and stayed resilient on the whole.

Historical data shows that the scale of banks’ foreign exchange settlement and sales surplus on behalf of clients usually hits the annual peak ahead of the Spring Festival, and the support from the supply-demand dynamics of China’s domestic forex market for RMB appreciation is poised to reach its strongest level of the year.