On Tuesday morning (November 26), the offshore RMB plummeted against the US dollar, falling below the 7.27 mark and reaching a four-month low. As of 8:18 AM Beijing time, the offshore RMB was at 7.2717, before slightly rebounding to 7.2628. Analysts pointed out that the decline in offshore RMB was mainly influenced by the rebound of the US dollar index and comments on tariff policy by US President-elect Trump.
US Dollar Rebound and RMB Depreciation Momentum Release
In terms of news, on November 25, Trump announced on his social media account that a 10% tariff would be imposed on all imported goods from China, and plans to levy a 25% tariff on goods from Mexico and Canada entering the US. This news boosted the US dollar index by about 30 points in the short term, breaking through the 107 mark. As of 9:33 AM Beijing time, the US dollar index was at 107.45.
Wang Qing, Chief Macroeconomic Analyst at Oriental Jincheng, stated that the decline in offshore RMB is closely related to the rebound of the US dollar index. He pointed out that yesterday's significant drop in the US dollar index was due to the weak dollar stance of the newly nominated US Treasury Secretary, and this morning's strong rebound directly lowered the RMB exchange rate.
Meanwhile, Wang Qing believes that the further depreciation of offshore RMB is also influenced by the release of previously accumulated momentum. He noted that during the previous substantial rise in the US dollar index, the depreciation of the RMB against the dollar was relatively limited, and the current depreciation trend is a gradual release of this potential momentum.
The Impact of Trump's Tariff Policy
Experts stated that Trump's tariff threats impact RMB exchange rates not only in terms of direct trade costs but also cause a psychological shock to market expectations and confidence. From the experience of Trump's "1.0" policy, the key to stable exchange rates lies in stabilizing expectations and confidence. Future regulations will need to use comprehensive measures to strengthen expectations guidance and avoid the formation of unilateral consistent expectations to prevent exchange rate overshooting risks.
Moreover, as Trump's policies further unfold, fluctuations in the US dollar may increase, leading to inverse fluctuations in the RMB exchange rate. Experts predict that the volatility of RMB exchange rates will still be significantly constrained by dollar volatility, with the fluctuation range possibly controlled at half or even lower levels of the dollar.
Market Outlook and Policy Recommendations
Currently, the short-term fluctuations in the RMB exchange rate have attracted widespread market attention, but in the long term, stabilizing expectations and enhancing supervision are key to avoiding excessive adjustments. Analysts suggest that decision-makers need to use a flexible policy mix, including intervention in the foreign exchange market and macroprudential management measures, to strengthen the foundation for RMB rate stability.
In the future, the market will closely monitor the US dollar index trends, US economic data, and the further development of Trump's trade policy. Investors need to be vigilant of the continuous impact of external factors on the exchange rate market, while also observing whether the RMB exchange rate can find a balance point in broader market sentiment.
