On February 23, the onshore RMB exchange rate against the US dollar rose by more than 100 points, strongly standing at the 6.32 mark, a new high since April 2018; The offshore RMB exchange rate against the US dollar once broke through the 6.31 mark, setting a new high in recent four years. The situation in Ukraine is volatile, the expectation of monetary policy normalization in major developed economies is rising, the global financial market is confusing, and the prices of major assets fluctuate sharply. Against this background, why is the RMB stronger against the wind? The trend is independent and the attribute of "safe haven" is prominent The strong rise of the RMB yesterday was not a short-term outbreak. Since February, although the demand for seasonal rigid foreign exchange settlement has declined, the RMB has shown a stable and strong trend as a whole, and the RMB has appreciated by 0.75% against the US dollar. Last week, the RMB appreciated nearly 0.5% against the US dollar, the largest weekly rise in the past 16 weeks. RMB "independent market" is still on. The dollar index, which was originally contrary to the RMB, has maintained a high shock under the increasingly strong expectation of interest rate hikes in the market recently. As of yesterday's press release, the US dollar index is still near the 96 mark, at 95.86. The strength of the RMB is not only against the US dollar, but also against major global currencies as a whole. On February 22, data released by the bank for International Settlements showed that the nominal effective exchange rate index of RMB rose 0.09% month on month in January to 128.67, which has risen for nine consecutive months and reached a record high. The strength of the RMB is remarkable. Recently, the global financial market is full of uncertainty, the situation in Ukraine is tense, and the expectation of monetary policy normalization in major developed economies is gradually rising. In this context, factors such as the significant narrowing of the interest rate gap between China and the United States should have put pressure on the RMB. What supports the strength of the RMB? Insiders said that the current foreign exchange market is dominated by risk aversion, and the "safe haven" attribute of RMB assets is prominent, which supports the maintenance of a strong RMB. Chang ran, senior researcher of Zhixin Investment Research Institute, said that the RMB has attracted the attention of European and American international investment institutions with its "low-risk" characteristics such as relatively low volatility and stable purchasing power. Recently, the price of global risky assets has fallen under the disturbance of geopolitics and the expectation of interest rate hike by the Federal Reserve, and the attraction of RMB assets has further emerged. "Since February, the offshore RMB exchange rate has shown a trend slightly higher than the onshore RMB exchange rate, reflecting the strong long trading of RMB in the international market." Chang ran said. The foreign exchange group of the research department of CICC said that considering that the interest rate difference between China and the United States fell all the way in January and the tense situation in Ukraine did not disturb the pace of foreign capital increasing its holdings of RMB bonds, the rapid appreciation of the RMB may be due to the inflow of foreign funds into Chinese assets. There are no conditions for sustained appreciation In the view of insiders, the RMB will remain strong in the short term. However, in the medium term, with the acceleration of the monetary policy shift of the world's major developed economies, the differentiation of monetary policies between China and the United States will increase significantly, which may make the RMB face devaluation pressure. Societe Generale research macro team believes that in the short term, the process of repairing the overvalued RMB exchange rate is interrupted by risk aversion. Before the risk aversion has subsided, the "safe haven" attribute of RMB assets will support the continued strength of the exchange rate, and the RMB exchange rate against the US dollar is expected to hit the 6.30 mark. However, this will also lead to a further narrowing of the interest rate gap between China and the United States, which will increase the medium-term pressure on the RMB exchange rate. Liu Meng, from the financial market department of CCB, believes that in the medium and long term, the RMB is facing the pressure of phased devaluation, mainly due to three factors: first, China's economic fundamentals will narrow and its supporting role for the RMB exchange rate will be reduced; Second, China's export growth rate may fall, the trade surplus will narrow, and the demand for foreign exchange settlement will decrease accordingly; Third, we still need to be vigilant about the impact of cross-border capital flows on the RMB exchange rate. "In the next stage, the RMB exchange rate is still resilient, but it does not have the conditions for sustained appreciation." Chang ran believes that the trend of RMB exchange rate will be "dominated by me" in 2022. The impact of the Fed's interest rate hike on the RMB exchange rate is relatively limited, and the annual trend may be more balanced. It is expected that the RMB exchange rate will maintain two-way fluctuations in the range of 6.2 to 6.7, with strong elasticity. (Xinhua News Agency)