On November 20th, the onshore and offshore RMB rose against the US dollar, both exceeding 7.17, with gains exceeding 800 basis points and 500 basis points respectively, both reaching new highs in three months. Since November, the onshore RMB has rebounded over 1400 points against the US dollar, while the offshore RMB has rebounded over 1700 points against the US dollar.

　　On November 21st, the RMB exchange rate continued to maintain an upward trend. As of 9:45 am on November 21st, the onshore and offshore RMB to USD exchange rates were reported at 7.1391 and 7.1432, respectively.

　　Multiple positive factors drive the RMB to skyrocket

　　Due to the continued strength of the US dollar, the Chinese yuan depreciated against the US dollar for most of 2023. However, under the strong stabilization signal from the People's Bank of China, the exchange rate remained stable at around 7.3 for most of the time.

　　November 20th is a big day for the Chinese yuan. On this day, both onshore and offshore RMB rose sharply against the US dollar, breaking the 7.17 mark.

　　From the news on that day, there are two pieces of news that are worth paying attention to: firstly, according to Reuters, international bonds denominated in RMB continue to develop, while the rise of overseas RMB loan business has made the RMB surpass the Euro and become the world's second largest trade financing currency.

　　Secondly, according to the website of the People's Bank of China, with the approval of the State Council, the People's Bank of China and the Central Bank of Saudi Arabia recently signed a bilateral currency swap agreement, with a swap scale of 50 billion RMB/26 billion Saudi riyals and a validity period of three years. The agreement can be extended upon mutual agreement. These two major positive factors have to some extent stimulated the strengthening of the renminbi.

　　It is worth noting that the strengthening of the RMB this time is not due to a single unexpected event, but rather a series of positive factors as a prelude. These positive factors include: regulatory efforts to stabilize exchange rate expectations for the Chinese yuan, continued introduction of countercyclical policies, continued resolution of financial risks, easing of geopolitical tensions between China and the United States, the US dollar peaking and falling, the arrival of seasonal exchange settlement points, and the sustained maintenance of a low central parity rate for the Chinese yuan. These positive collective efforts are the key to achieving a favorable situation for the renminbi.

　　Which industries will benefit?

　　"From a cost perspective, the appreciation of the RMB means a decrease in import prices, especially in industries that rely on bulk commodity imports, such as papermaking, basic chemicals, transportation, etc. An increase in the relative value of the RMB can reduce the cost of bulk commodities denominated in US dollars, thereby increasing profits," said Huatai Securities "Reviewing the aviation airports and industrial metal industries that rely relatively on imports, it can be found that the short-term cost effect of RMB appreciation is equally significant."

　　In addition, Huatai Securities also analyzed that the relative fundamental effect of RMB appreciation is a decrease in overseas income denominated in US dollars, so industries with higher domestic income ratios will benefit more from RMB appreciation.

　　"The appreciation of the RMB often corresponds to a period when domestic demand is stronger than external demand, benefiting food and beverage, media, computers, decoration and building materials, which account for a relatively high proportion of domestic revenue." Huatai Securities pointed out.

　　However, Huatai Securities reminds that during the period of RMB appreciation, domestic demand is usually stronger than external demand. Export oriented industries such as textiles and clothing, which account for a relatively high proportion of overseas revenue, are affected by relatively weak external demand and declining export price competitiveness, putting pressure on both revenue and profit.

　　How can I get to the aftermarket?

　　So, what will happen to the future trend of the RMB exchange rate?

　　Last week, the Chinese yuan surged nearly 500 points in a single week, driven by positive signals from China US relations, a decline in US bond yields, and seasonal demand from exporters for foreign exchange settlement. Although the subsequent trend of the renminbi still depends on changes in the US China interest rate spread and the recovery of the Chinese economy, the short-term sentiment driven bearish market may lead to a super appreciation of the renminbi.

　　Barclays foreign exchange and macro strategist Zhang Meng mentioned that exporters' foreign exchange settlement at the end of the year and during the Spring Festival will also drive the spot exchange rate to continuously approach the middle price.

　　Ping An Securities believes that the maximum stage of depreciation pressure on the RMB exchange rate has passed, and factors favorable to the RMB exchange rate are gradually accumulating. There is still a slight appreciation space for the RMB exchange rate this year, and it may fluctuate between 7.15 and 7.35 in the short term.

　　Standard Chartered Bank currently expects the US dollar/RMB to remain between 7.20 and 7.15 in the first half of 2024, and then decline to 7.00 in the fourth quarter. Barclays expects that the US dollar/RMB will continue to fluctuate between 7.25 and 7.35 in 2023, with a target price of 7.2 for 2024.