- Data released by the China Foreign Exchange Trade System shows that the CFETS RMB exchange rate index rose to 100.1, marking its highest level since April 30, with a cumulative increase of 2.15% year-to-date.
- The central parity rate showed a divergent trend, with the RMB to USD central parity rate at 6.8401, a slight adjustment of 30 basis points; meanwhile, the RMB appreciated against the euro and yen by 179 and 67 basis points, respectively.
- The Bank for International Settlements and the Special Drawing Rights currency basket index recorded a slight increase, as Bulgaria's formal entry into the Eurozone in early 2026 has led to a new round of mechanical adjustments in the number and weight of basket currencies.
Attribution of Basket Currency Structure and Index Performance
The recent rise in the RMB exchange rate index is not due to unilateral exchange rate fluctuations but is the result of the comprehensive effect of multilateral cross-exchange rates within a specific weighting system. Among the 25 basket currencies set by CFETS, the relative weakness of non-US currencies provided the main technical support for the index's rise. Today's central parity data shows the RMB appreciated by 0.22% against the euro, 0.15% against the yen, and 0.14% against the Korean won. Since the euro and yen hold significant weight in both the CFETS and Special Drawing Rights baskets, their depreciation against the RMB effectively offset the RMB's slight 0.04% depreciation against the USD, resulting in an overall upward trend in multilateral exchange rate valuation.
Exchange Rate Pricing Mechanism and Central Parity Counter-Cyclical Adjustment
The RMB to USD central parity rate at 6.8401 reflects the monetary authorities' balance between maintaining relative stability in bilateral exchange rates and releasing market clearing pressure. The year-to-date cumulative increase of 2.15% indicates that the pricing model of the China Foreign Exchange Trade System effectively filters out short-term noise from external markets. Against the backdrop of fluctuating expectations of the Federal Reserve's monetary policy, the robust performance of the CFETS index demonstrates that the counter-cyclical factors and basket currency reference framework in the pricing mechanism are playing a core role in smoothing cross-border capital flow expectations and blocking unilateral speculative trading.
Historical Evolution and Technical Adjustments of Currency Basket Weights
The continuity of the exchange rate index requires dynamic weight adjustments to maintain. Since the end of 2016, when the number of CFETS basket currencies was first expanded from 13 to 24, the index has undergone multiple technical revisions. By the end of 2024, the total number of currencies will further increase to 25, and after Bulgaria joins the Eurozone in January 2026, the Bank for International Settlements basket will incorporate the lev weight into the euro, reducing the number of basket currencies to 42. This periodic base period reset and trade weight adjustment ensure that the index accurately reflects the actual scale of bilateral trade between China and other major trading partners, reducing distortions caused by the shrinking share of a single trading entity.
Offshore-Onshore Spread and Forward Curve Shape
From the current distribution of market liquidity, the spread between the USD against offshore RMB and the onshore market remains within a reasonable range, indicating that offshore market liquidity has not significantly tightened or accumulated. In the forward market, swap point pricing is still constrained by the benchmark interest rate differential between China and the US. Although the CFETS index reached a two-week high, if the USD index strengthens again due to macroeconomic data exceeding expectations, the relative strength of the RMB's multilateral exchange rate may be repriced on the forward curve, and corporate foreign exchange settlement and sales strategies need to be adjusted based on the new volatility center.
