After breaking multiple barriers in a strong upward trend, the RMB exchange rate against the US dollar fluctuated slightly at the equilibrium level. On August 6th, the central parity rate of the Chinese yuan continued to rise, with slight fluctuations around 7.15 and 7.14 for onshore and offshore renminbi against the US dollar, respectively. Since August, the exchange rate of RMB against the US dollar has shown a significant appreciation trend amidst the turbulence in the financial market. Both onshore and offshore RMB against the US dollar reached their highest points of appreciation during trading, and offshore RMB against the US dollar even rose above the 7.10 mark at one point. Under the double-edged sword of the RMB exchange rate, what should users and foreign trade institutions with exchange needs do? The offshore market performance strengthened On August 6, the People's Bank of China authorized China Foreign Exchange Trading Center to announce that on August 6, 2024, the central parity rate of the RMB exchange rate in the inter-bank foreign exchange market was 7.1318 yuan, up 27 basis points in a single day, compared with 7.1345 yuan in the previous trading daily. The central parity rate of the Chinese yuan against the US dollar has shown an appreciation trend for two consecutive trading days. On the same day, there was a slight correction in the onshore RMB to USD and offshore RMB to USD exchange rates, fluctuating slightly around 7.15 and 7.14 respectively. As of 18:15 on August 6th, the onshore RMB exchange rate against the US dollar was reported at 7.1500, with a daily depreciation of 0.28%; The offshore RMB exchange rate against the US dollar was reported at 7.1456, with a intraday depreciation of 0.11%. In fact, since August, the RMB exchange rate has shown a strong upward trend. Overall, in the four trading days of August, the onshore RMB appreciated to a maximum of 7.1155 against the US dollar, an increase of 1047 basis points from the highest closing price in July; The offshore RMB exchange rate against the US dollar briefly approached 7.08 during trading, up 1430 basis points from its highest closing price in July. Further comparison reveals that in this round of RMB exchange rate appreciation, the offshore RMB has risen more than the onshore RMB, which is not a common occurrence in past currency market fluctuations. From the perspective of the highest appreciation point, the offshore RMB against the US dollar reached a intraday high of 7.0836, setting a new high since June 2023. After the opening on August 6th, the difference between the onshore RMB to USD exchange rate and the offshore RMB to USD exchange rate narrowed, but the overall performance of the offshore RMB remained stronger than that of the onshore RMB. Yang Haiping, a researcher at the Securities and Futures Research Institute of the Central University of Finance and Economics, said that the offshore RMB exchange rate trend is better than the onshore RMB exchange rate trend, which may be due to some funds flowing out of the US financial market urgently seeking safe haven assets. Wang Xinyuan, a senior foreign exchange analyst at Lianlian International, further explained that due to the fact that the participants in the offshore RMB market are mostly global banks, global financial institutions, cross-border multinational corporations, and professional investors, they are more sensitive to changes in global economic and financial markets, and the components determined by market supply and demand are relatively higher. Therefore, the price volatility of offshore RMB is greater than that of onshore RMB. When the offshore RMB depreciates compared to foreign currencies, its depreciation is greater; When the offshore RMB appreciates compared to foreign currencies, its appreciation rate will naturally be greater. The reasons for this round of RMB appreciation are relatively sudden, with the significant pullback of the US stock market, the significantly lower than expected non farm payroll data, and the dual strong intervention of the Bank of Japan all occurring in the short term. The offshore RMB market responds relatively quickly, with a higher appreciation rate than the onshore RMB, resulting in a situation where the offshore RMB exchange rate trend is better than the onshore RMB against the US dollar Wang Xinyuan pointed out. Financial market turbulence occurred on August 2nd, when the United States released non farm payroll data for July, which was overall weaker than market expectations. In addition, the weak performance of the US job market data, coupled with the increasing expectation of the Federal Reserve's September interest rate cut, has also expanded investors' concerns and panic, further triggering significant fluctuations in the financial market. After the opening on August 5th, stock markets in many countries around the world experienced a "Black Monday". As of the end of the day, the Nikkei 225 index had fallen 12.4%, completely wiping out the year's gains and setting a record for the largest decline in history. On August 5th local time, the three major stock indexes in the US capital market also closed down across the board. As of the close of the day, both the Dow Jones Index and the S&P 500 Index recorded their largest daily declines since September 2022, with the Dow Jones Index closing down 2.6% at 38703.27 points and the S&P 500 Index closing down 3% at 5186.33 points. Affected by financial market fluctuations, the gold market is also facing a 'bloodbath'. On August 5th, London gold spot prices fell below $2400 per ounce, and COMEX gold also approached this integer level at one point. However, based on the performance of financial markets on August 6th, most major stock markets in the Asia Pacific region closed higher, and the gold market also stabilized. It is precisely in such intense fluctuations that the exchange rate of the Chinese yuan against the US dollar has risen rapidly against the trend. On the evening of August 2nd, the exchange rate of the Chinese yuan against the US dollar skyrocketed, breaking through multiple integer thresholds and eventually reaching around 7.10. The two major exchange rate quotes have almost recovered all the depreciation losses of the year, setting a new high for the year. Based on a comprehensive analysis of the reasons, Wang Xinyuan pointed out that the recent appreciation trend of the Chinese yuan is mainly due to the weakening of the US dollar index in the foreign exchange market and the strengthening of Asian currencies driven by the Japanese yen. The two-way fluctuation elasticity is expected to be enhanced. Based on the double-edged sword characteristic of the RMB exchange rate, the recent appreciation trend of the RMB exchange rate has also attracted attention from users and foreign trade institutions in the market who have exchange needs. From the performance of onshore RMB exchange rate within the year, on July 24th, the onshore RMB depreciated to a minimum of 7.2777 against the US dollar, which is also the lowest depreciation point of onshore RMB against the US dollar within the year. Based on the onshore RMB to USD exchange rate of 7.1500 at 18:15 on August 6th, users can save 1277 yuan by exchanging 10000 US dollars. I didn't catch up with the highest appreciation point on August 5th, but the latest performance of the RMB exchange rate has exceeded my expectations. The summer vacation is coming to an end soon, and I will go to the United States to continue my studies. After noticing the news of the appreciation of the RMB exchange rate, I quickly made an appointment for foreign exchange to minimize the cost of exchange Reader Li Li told a reporter from Beijing Business Daily. Besides the group like Li Li, foreign trade institutions with greater demand for foreign exchange settlement and sales face greater challenges in the face of fluctuations in the foreign exchange market. Beijing Business Daily reporters have noticed that in recent times, many investors have asked relevant institutions on interactive platforms whether the company has taken any measures to cope with exchange rate risks. From the response content, spot foreign exchange settlement and foreign exchange derivatives are still the main means for institutions to cope with exchange rate risks. Under the awareness of "risk neutrality", more and more foreign trade institutions are paying attention to the impact of exchange rate fluctuations on their own operations, and paying attention to the use of various tools to lock in future exchange rates in advance for delivery to avoid profit erosion caused by exchange rate fluctuations, such as the Star Exchange Lock product of Lianlian Planet under Lianlian International. In Wang Xinyuan's view, this round of exchange rate changes is a relatively favorable market for individuals who have the need to purchase foreign exchange (such as international students or travelers abroad) as well as import enterprises in the direction of purchasing foreign exchange. This type of user group can consider purchasing the required foreign currency at a low price in the near future to cope with the expected depreciation of the US dollar caused by the Federal Reserve's interest rate cuts. In the future, they may be able to purchase the required foreign currency at a relatively better exchange rate. When it comes to the performance of the RMB exchange rate in the next stage, Yang Haiping believes that the pressure of RMB depreciation has weakened, but due to the further complexity of the international financial market, the flexibility of RMB exchange rate fluctuations in both directions will increase. (New Society)